The financial organization who are not able to get NBFC licenses are indirectly buying out some existing NBFC license company which are mainly not in operational business. It saves time and money and it is also one of the effective way to get an NBFC license. The NBFC Company which are not accepting deposit and which are registered with the RBI are available for sale through NBFC laising group. Buying out an NBFC is easier than getting a fresh license for NBFC.
PROCEDURE
- Before buying any NBFC company the acquirer company shall have a proper due diligence of the documents of the target company and once the management confirms the acquisition than a MOU must be signed between the parties
- The proposal of selling NBFC must be approved by the Board of Directors
- Some of the important documents like business plan, projected plan for three years must be prepared in reference to incoming directors as suggested by the acquirer
- The documents must be submitted to RBI were the registered office of the company is located
- All the queries of RBI must be replied in timely manner for the matter related to takeover
- Once the approval of RBI is received, public notice in two newspaper one in English and on in local language were the registered of the company is situated at least 30 days prior to effecting the sale or transfer
- Intimate to RBI within 7 days of publication of such notice
- A share purchase agreement must be signed and then the management of the company is handed over to the acquirer and payments of any considerations if any as may be agreed between the parties
- All rights, titles, interests and assets have been transferred to the buyer
- The credibility of the acquirer is one of the most important point for getting RBI approval for change in management.
APPROVALS FROM RBI
- Prior approval of RBI is required to NBFC for Sale.
- Details of proposed director and shareholders
- Sources of funds of the proposed shareholder acquiring the shares in NBFC
- The proposed directors and shareholders must give a statement that they are not associated with any entity which is accepting deposits
- The proposed directors and shareholdersmust give a statement that they are not associated with any company whose application of registration has been rejected by RBI
- The proposed directors and shareholdersmust make a statement that there is no criminal case or any offence under section 138 of Negotiable Instruments Act against him.
- A report of the bankers of all proposed directors and shareholders
- Financial Statements for last three years
PRIOR APPROVAL OF RBI
- Any NBFC Takeover, which may or may not result in change of management
- Any change in shareholding which result in 26% or more of the paid up equity capital of NBFC. Prior approval not required if the change in shareholding is more than 26% due to buy back or reduction of share capital
- Any change in the management of the company for more than 30% of the board of directors excluding independent directors
- Prior approval will not be required for those directors who are re-appointed on retirement by rotation.
- Application must be submitted to the regional office of RBI were the registered office of RBI is located
BENEFITS
- With the reduction in exposure of banks, NBFC have significantly increase their exposure to the realty sector backed by liquidity and effective interest rate.
- One of the biggest advantage of NBFC is that they can adopt various tools for corporate debt restructuring without resorting to refinancing as the regulations of the commercial banks are not applicable to NBFC.
- They can buy and sell the inventory as there is no limitation for the same
- NBFC can come up with new innovative practical models for recovering the money.
GENERAL TERMS AND CONDITIONS
- Under the process of buy or sale NBFC, all the assets of the target company and balance sheet will be liquidated and the liabilities will be paid off and acquirer will get neat and clean bank balance in the name of company which will be calculated as net worth as on date of NBFC takeover and which also be taken over by the concerned acquirer after acquisition of the said NBFC.
- Mainly it takes 3 to 4 months approximately for change in management of NBFC.
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