BUY NBFC ONLINE IN INDIA
NBFCs or Non-Banking Financial Companies are those companies which have been established either under the Companies Act of 1956 or 2013. They have been playing a vital role in the development of the Indian economy by bringing accessibility, diversity, convenience, and efficiency into the financial sector.
They are 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 the 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, from 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, 2013 and then get it registered with the 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, 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 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 via 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, it’s assets and liabilities have been 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 which must be taken is to get the deal approved by the Board of Directors in a general meeting.
Once the Board has consented to both the firms, an MOU with the Target NBFC has to be finalized & 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 about the field of “finance, 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, then 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 has been received, by the proposed shareholders which is to be used for acquiring shares in the target NBFC.
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 newspaper and one leading local newspaper, at least 30-days before this transaction (of transfer or purchase of shares, which 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.
The 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 which are available for 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 and “CompanyRegistrationOnline” will begin the process of compliances, scrutiny, due diligence, preparation of 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 the Target to stick to the terms, conditions, and time-lines specified in it.
Share Purchase or Transfer Agreement
During the purchase of 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 has been issued. The assets of the seller or the Target NBFC are discharged in the balance sheet and liabilities are 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 which are to be followed while determining the net worth.
This is the final step in 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
It is 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 some other marketable securities from the government or the local authorities. 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 the immovable property.
An NBFC Company accepts deposits, in lump sum or installments, under various schemes/plans/arrangements.
As soon as you register with us, our executive shall call you to discuss in detail the NBFC you are looking for. The region, your objectives, requirements, and budget, etc. We’ll advise on the sellers listed on our website & more. Once you have selected, we’ll take over the process and apply to RBI. We’ll perform every step of the process with due diligence. You can just sit back and relax.
• 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 (Both National and Local)
• Settle all the inquiries or objections raised, either by RBI or the public.
The convenient method to buy NBFC in India would be to get registered with CompanyRegistrationOnline. We have over 10+ years of experience in 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 of 30% of the Directors.
(This 30% is excluding Independent Directors. Also, approval from RBI has 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 replacing Directors/ shareholders.
Or you can simply get in touch with CompanyRegistrationOnline. We assure you, to provide the option of buying the best NBFC (according to your goals)
And the whole process will be completely hassle-free.
(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 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.
If RBI approves without asking for the documents, the NBFC would be required to submit the same after the process of transfer is complete. All applications would be considered by RBI on a case to case basis.