Detailed Introduction to the NBFC Takeover

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Takeover of NBFC
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Takeover of NBFC
NBFC Takeover happens when the organization
planning to obtain influences an offer trying to
accept control over the objective to organization
it is finished by buying a larger part stake in
the organization. As indicated by RBI rules,
before procuring any NBFC organization, the
acquirer requires earlier endorsement from RBI.
An application must be made on the letterhead of
the organization which must be submitted to the
territorial office.
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When is Prior Approval Necessary?

•  Whenever the acquisition or takeover results in
  a major change in management.
• If any amendment is made in the management and
  that change result in management leads to more
  than 30 change of directors of the company
  acquired.
•  If the deviation in shareholding leads to 26
  transfer of the paid-up capital of the NBFC, then
  prior approval is necessary

Related Difference between NBFCs and Banks
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Process of NBFC Takeover

• The acquirer of the NBFC should conduct some due
  diligence of the financial condition of the
  target company.
• Documents to be submitted to RBI are KYC
  documents, the projection for three years is to
  be prepared with reference to incoming directors
  which is suggested by the acquirer
•  Submission of documents which are prepared so
  that they can be submitted to the RBI should be
  done to the registered office where the company
  is located
•  Once RBI approval letter to issue public notice
  is received it is to be published in 2 newspapers
  for 30 days as per the guidelines laid down by
  RBI.
• The signing of Share Purchase Agreement and
  change in management, payment of any remaining
  prerequisite. That has to be carried out on the
  31st day of newspaper notice or as mutually
  agreed by all the parties.
•  Report on the proposed directors/ shareholders
  before the transfer of ownership of shares or
  control of the NBFC Company is transferred, the
  financial statement of last three years is to be
  published for at least 30 days in the newspaper.

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Information about Directors/ Shareholders

• A declaration by the proposed shareholders is to
  be submitted stating that they are not associated
  with any unincorporated body that accepts
  deposits.?? 
• Declaration by the proposed directors/
  shareholders that there is no criminal case,
  including for offence under section 138 of the
  Negotiable Instruments Act, against them
•  All the proposed directors of the NBFC Company
  have to make a Declaration that they are not
  associated with any company whose certificate of
  registration has been denied by RBI.

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