BUY NBFC ONLINE IN INDIA
NBFCs or Non-Banking Financial Companies are companies established either under the Companies Act of 1956 or 2013. They have been playing a vital role in the economy in India by bringing accessibility, diversity, convenience, and efficiency into the financial sector.
They must be involved in the principal business of providing loans and advances, acquisition of shares, stocks, bonds, insurance business, or chit business, etc.
These companies do not need to possess a banking license, yet are involved in similar financial services. Transacting with these entities is much easier because of their hassle-free terms & conditions, quicker decisions, prompt services, advisory in non-financial matters, and expertise in niche segments. The severity of the country’s financial system got reduced because of NBFCs serving in regions where banks do not reach.
And because they provide services related to finance, these companies also have to mandatorily get an NBFC License by the Reserve Bank of India, RBI.
Buy an NBFC
In case you are looking to own an NBFC business in India, you can opt to either:
- Get a new company incorporated under the Companies Act and then get it registered with RBI as an NBFC, or
- Buy an existing NBFC.
As in most other cases, the time taken to buy-out an existing business is quicker than establishing a new one. Buying an NBFC takes around 2-3 months’ time, whereas getting a new company established and then registered with RBI as an NBFC can take anywhere between 3-6 months. Moreover, building a business up from scratch will take a lot of time and effort. This can be avoided by taking over an existing NBFC.
You have the option, again, of purchasing an NBFC which is has been put on sale. Or, if you have zeroed in on an NBFC to buy, not already on sale, you can do so by acquiring its control by deliberating planning. This acquisition is done without the knowledge of the seller, especially if the seller or the Target NBFC is unwilling. In both situations, the balance sheet of the Target NBFC would stand at null, after all its assets and liabilities taken over by you, the Acquirer.
RBI has provided a step-by-step procedure for buying NBFCs. If the deal is a friendly buying, the first step to take is to get it approved by the Board of Directors in a general meeting. Once the Board has consented in both the firms, an MOU with the Target NBFC has to be finalised & signed, to execute the acquisition. Generally, an MOU is signed and some advance money is paid to the seller, as a token. And then the rest of RBI’s requirements are to be met.
Some precautions must necessarily be undertaken by the buyer to evaluate the worth of the seller. All matters pertaining to its financial, legal, corporate and other, must be reviewed and evaluated diligently.
Is Prior Approval from RBI Required
Before buying an NBFC, first, check whether you need prior approval from RBI for buying the selected NBFC or not. The Acquirer needs to apply for approval from the RBI in certain cases, before commencing the process. Some cases, however, do not require any such prior approval.
The situations when it is necessary to take prior approval from RBI:
Whenever an NBFC is acquired/bought/taken-over/merged/amalgamated, whether any changes have been made in the management or not.
The structure of shareholding has changed, resulting in at least 26% transfer of the paid-up equity share capital of NBFCs. This may have happened over some time.
**Except when the buyback or reduction in the share capital has been approved by a competent court.
An amendment in the management structure, by changing more than 30% of the Directors.
**Independent Directors are not included in this 30%. If the change is due to a routine rotation of Directors, approval from RBI is not required.
In case proper documents have not been submitted with the application, the application would be considered null and void by RBI.
Requirements for Applying for RBI’s Prior Approval
If the transaction to buy out the Target NBFC is similar to any of the above situations, and you need to apply to RBI for prior approval. And your application, along with a cover letter on the letterhead of the company, needs to be accompanied by the following documents:
Details about the proposed Directors/shareholders/members & their ID proof, Address proof.
Education, Qualifications, and Experience certificate of the proposed Directors.
Origins, from where the amount to be used for acquiring shares in the target NBFC, have been received, by the proposed shareholders.
Statement by the proposed Directors/shareholders declaring that they are not associated with any entity which was denied a Certificate of Registration by the RBI.
Declaration of not having a criminal background and/or Non-conviction u/s 138 of the Negotiable Instruments Act by all the proposed Directors/shareholders.
Statement by all the proposed Directors/shareholders/members declaring their Non-association with any entity accepting deposits,
Clean Banker’s Report on proposed Directors/ shareholders.
Once the above documents are ready, you are to submit these documents to the Regional Office of the Department of Non-Banking Supervision (DNBS) of RBI, under whose jurisdiction the Registered Office of the NBFC is situated. RBI may ask for some clarifications on the points mentioned in the application. All such queries must be replied to, well in time, and avoid any undue delay or cancellations from RBI to process your application.
Is Prior Public Notice About Changes Required?
Once you have the approval from RBI to buy the Target NBFC, a public notice is to be given in one leading national and one leading local newspaper at least 30-days before this transaction of transfer or purchase of shares is to take place.
RBI requirements are:
Benefits of Buying an Existing NBFC
By buying an existing NBFC rather than getting a new one registered, you save on time. You can use this time to enhance the work of the previous entity. Though, both processes, of getting a new one registered or buying an existing one involve similar steps. Still, the preparation time is quite less if you buy an existing one. Or you may take an NBFC on rent. This prevents those problems that any new entity faces while setting up a business, making it known to the associates, etc. A few of the advantages of purchasing an NBFC have been given here:
Competition is reduced.
Rise in sales/revenue.
Customer Base and Distribution Network increases.
Economies of scale.
Why Buy an NBFC with CompanyRegistrationOnline
NBFC sector, their transactions, any entry or exit into this sector is stringently regulated by RBI. All compliances of RBI must be duly fulfilled. Therefore, it is advised to take the help of skilled professionals who are in the know. Someone well aware of the processes, the requirements and all provisions of RBI.
And that skilled professional is what you shall get with CompanyRegistrationOnline. We assure 100% assistance at every step of the journey. From fulfilling all RBI requirements, accounting, and reporting during the deal to meeting the RBI compliances afterward. All the processes are done in strict secrecy.
We have listed NBFCs on sale on our site, so you can choose according to your preference, goals, and budget. We also help with mergers, take-overs, and collaborations. We also make available NBFCs on rent in the area of your choice.
The process with us would start with a detailed telephonic consultation. We ask a few questions. To enable us to get an insight into your requirements and goals and offer you the most suitable organization.
Next, together, we go through all the compliances, legal requirements, forms to be filed, information/paperwork to be completed, as required by RBI.
Now, you can sit back and focus on your business. CompanyRegistrationOnline shall begin the process of compliances, scrutiny, due diligence, preparing MoU, Share Transfer Agreements, etc. Of course, we’ll update you on every step we take.
Our services, related to NBFCs are:
Approval for Management Change from RBI
Designing Financial Services
Marketing Digital Loan Products
Meeting RBI Compliance
Internal Audit Services
Important Tips for Purchasing an NBFC
Before the process of buying an NBFC with RBI begins, it is better to make sure the following checks are performed:
After verifying all this information, you also need to sign a formal MoU agreement, along with a certain token amount, as mutually agreed. This binds both the Acquirer and Target to stick to the terms, conditions, and time-lines specified in it.
Share Purchase or Transfer Agreement
During buying an NBFC, the final step is to discharge the Share Purchase Agreement. This agreement is signed by both, the buyer and the seller, after the public notice of buying. The assets of the seller or the Target NBFC are discharged in the balance sheet and liabilities paid off. So the Acquirer Company receives only a clean balance sheet. The amount is calculated on the basis of the net worth of the Target NBFC as on the date of the takeover. RBI has also provided directions to be followed while determining the net worth.
This is the final step to the official handover of the management and the assets/liabilities from the Target Company to the Acquirer Company. In case any consideration is remaining, it shall be paid off within 31 days of the public notice in the newspaper, as per RBI. Or as mutually agreed by all the parties.
Frequently Asked Questions
involved in the business of providing finance, loans, and advances to the public. An NBFC company may be involved in acquiring shares, stocks, bonds, debentures, and securities from the government or the local authorities or some other marketable securities. It may be engaged in the business of hire-purchase, leasing, insurance, chit fund, etc. But it should not be involved in agricultural
activities, industrial activities, purchase or sale of any goods (other than securities) or providing any services and
sale/purchase/construction of immovable property.
An NBFC Company accepts deposits, in lump sum or instalments, under various schemes/plans/arrangement.
• Do a thorough check on the target NBFC to make sure that what is being shown on the papers actually exists.
• Decide whether you want to buy the NBFC by taking over the management or shareholding.
• Check if Prior Approval from RBI is required or not. And apply accordingly.
• Notify the public about the planned deal in at least 2 leading daily newspapers.
• Apply to RBI for approval, with the application & the documents as required.
• Publish again in 2 leading newspapers.
• Settle all the inquiries or objections raised, by RBI or public.
The convenient method to buy NBFC in India would be to get registered with CompanyRegistrationOnline. With over 10+ years of experience of meticulously carrying out all government compliances.
The situations specified by RBI are:
• Whenever there are changes in the ownership of an NBFC. It may or may not be due to changes in the management structure.
• The structure of shareholding has been altered. When 26% or more of the paid-up equity share capital of the target NBFC has been bought or transferred. This may have happened over a period of time.
(Except if this buyback of the shares or reduction in the capital has been approved by a competent court.)
• The structure of management has been modified. By replacing at least 1/3rd or 30% of the Directors.
(This 30% is excluding Independent Directors. Also, approval from RBI is not required if the change is the result of a rotation of Directors.)
1. Origins of funds that you are going to use in acquiring the shares of the Target NBFC.
2. Details about the proposed Directors/shareholders/members. Their ID & Address proof, Education, Qualification, and Experience proof.
3. Declaration by these replacing Directors/shareholders/members about their non-association with any financial institution, involved in the business of financial activities, that was earlier denied a CoR by the RBI.
4. Declaration by the proposed Directors/shareholders/members, that they do not have any criminal record and/or Non-conviction u/s 138 of the Negotiable Instruments Act,
5. Declaration, that they have not been connected to any unregistered entity accepting deposits, by the proposed Directors/shareholders/members,
6. Clean Banker’s Report on the replacing Directors/ shareholders.
Or you can simply get in touch with CompanyRegistrationOnline. We assure the best NBFC according to your goals and the most hassle-free deal.
(i) any change in the shareholding of the NBFC, after the sale, which would result in a change of the shareholding pattern by 26% or more of the paid-up equity capital of the NBFC
(ii) any change in the management of the NBFC that would result in a change in more than 30% of the directors, excluding independent directors.
However, in case an investor dies, the NBFC may opt to repay the deposit, even within the lock-in period. This remains at the discretion of the NBFC. It has to be requested by the joint holders with survivor/nominee/legal heir only against the submission of relevant proof.
An NBFC (not a problem company), subject to the above provisions, may permit premature withdrawal, after the lock-in period is over, at its sole discretion, at the rate of interest prescribed by RBI.
A problem NBFC is prohibited from making any premature repayment or granting any loan against public deposit/deposits, as the case may be. The prohibition does not, however, apply when an investor dies or repayment of small deposits, up to an amount of Rs. 10000/-.