Buy NBFC2020-01-27T10:39:38+00:00

BUY NBFC ONLINE IN INDIA


Buy NBFC Online
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NBFC

 
 

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.

  • Profitability increases.

  • 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:

  • Renting NBFCs

  • Takeovers

  • Mergers/Demergers

  • Business Re-structuring

  • Contract Drafting

  • 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

What is an NBFC?
How to buy an NBFC?
What is the process of buying an NBFC?
What is taking Prior Approval from RBI?
How to take Prior Approval from RBI to buy NBFC?
Is Prior Approval required if an NBFC is bought by another NBFC?
Is Prior Approval from RBI required if an NBFC is bought by a company which is not an NBFC?
Is Prior Approval required for amalgamating 2 NBFCs?
Is Prior Approval required before approaching any Court or Tribunal for seeking orders for merger/amalgamation?
Can a company make an earler payment of its public deposits?
Whether acquisition or transfer of shareholding of 26% or more of the paid-up equity share capital of an NBFC within the same group i.e. intra-group transfers require prior approval of RBI?