NBFC Sale India2020-06-16T07:54:09+00:00

NBFC Sale India


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NBFC Sale India
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NBFC for Sale in India

 
 

Today, in India, due to the instability in the economic sector since the last few years, businesses are being sold, bought, taken over, merged or collaborated. The small banks, that were proliferating 5-6 years ago, have been taken over by the bigger ones or been merged. Their number has reduced by at least 30-40%, if not more. Similarly, the NBFC sector also has been impacted by these compromises and arrangements. Reserve Bank of India (RBI) has laid down specific procedures to be followed, for all these buying, selling, and other collaborations. The sale of NBFC is when an NBFC is being sold to another company in India. An NBFC can only be sold to another registered NBFC or an established Non-NBFC Company, as per RBI provisions.

NBFC sale would bring two companies together. For this transaction to be executed successfully, the balance sheet of the NBFC on sale has to stand at null. So that the buyer can take it over all its assets and liabilities.

To sell your NBFC, you need a buyer or an Acquirer. Your company or NBFC which is on sale is referred to as the Target Company.

Why Choose CompanyRegistrationOnline

 
 

The smart platform for Takeover, Selling and Buying of NBFC anywhere in India. We provide complete assistance to clients willing to sell their NBFC, with our expertise and experience of more than 10 years. We fulfilling every step, diligently, of the entire process laid down by RBI for such transactions. So that all its regulations are duly fulfilled. From drawing up MoU, KYC documents preparation as per the RBI requirements, submissions to RBI for approval for change of management, and finally completing the process of NBFC Sale, after RBI’s approval, by executing Share Purchase Agreement (SPA) and implement the changes in the management.

The process would start with a telephonic consultation. This way, we understand your requirements, expected price, and goals. We can provide inside details about the companies willing to buy your NBFC, listed on our website here.

Our other related services are:

  • Internal Audits

  • Re-Structuring

  • Assets Valuation

  • Advisory on Compliances with Multiple Laws

  • Underwriting and Risk Assessment Model Assistance

  • Applying & Getting RBI Approval for Management Changes

Process of NBFC Sale

 
 

  • The first step is that the Board of Directors of both, the Target and the Acquirer companies, favour this sale, in a Resolution.

  • Once approval from the Board has been exacted, the Acquirer Company would need to go through the financials and administrative documents.

  • You both need to sign an MOU (Memorandum of Understanding). And you must take some token money as confirmation of buying, from the Acquirer.

  • Now get KYC Documents, Business Plan and Projection prepared for the next 5-years for the Directors of the Acquirer.

  • These documents are to be submitted to the regional office of RBI under whose jurisdiction your NBFC comes.

  • Resolve all queries of RBI.

  • Public notice is to be published when RBI approves of the deal, following its guidelines. It is to inform the general public that a sale/transaction is about to take place. And invite objections, if any, from the public or some other party involved.

  • After 31 days have passed of this notification and all disputes settled. Both companies can sign the Share Purchase Agreement. The management will be handed over. And you receive the balance payment. You and the Acquirer can decide another day for the transfer, before-hand.

  • Before this, all assets in your balance sheet are to be liquidated and liabilities are to be paid off. So the Acquirer gets a clean bank balance in the name of your NBFC. The net worth is to be calculated on the date of sale. RBI has also prescribed how to determine this net worth.

Entire sale procedure and getting RBI approval for change in management of the NBFC takes at least 2-3 months. And every step needs meticulous planning and thorough attention with constant follow-ups with RBI.

Process to take RBI Approval for NBFC Sale in India

 
 
Sale/purchase/merger, etc. or making certain changes in the management of an NBFC requires prior approval of RBI. All documents to be submitted to RBI must have a mutual understanding of the Acquirer Company.

  • Apply, on the letterhead of the Company, to the regional office of RBI having jurisdiction. Along with a cover letter.

  • Provide details about the proposed Directors/shareholder members is to be enclosed with the application.

  • Statement by the proposed Directors/shareholders declaring their non-involvement with any other entity which is engaged in the business of loans and accepting deposits, but is not registered with RBI.

  • Declaration by the proposed Directors/members that they are not involved with any such financial institution, whose application for CoR (Certificate of Registration) was rejected by RBI.

  • Proposed Directors/shareholders to also declare that there is no criminal case, against them, including any offense u/s 138 of the Negotiable Instruments Act. Whether pending or convicted.

  • Banker’s Report on the proposed Directors/members.

  • The sources from where the funds are being arranged to buy out your NBFC.

  • Financial statements and Annual Reports for the years your NBFC has been in existence or the last 3-years, whichever is higher.

  • There is a requirement of RBI to notify the public. Either individually or jointly by the parties. A notification is to be published at least 30 days before actualizing the sale of, or transfer of the ownership.

This application has to be submitted to the Regional Office of the Department of Non-Banking Supervision (DNBS), under whose jurisdiction your registered NBFC office comes. Regular follow-ups with RBI and resolving any queries must be done. Necessary to ensure that there is no delay from RBI in processing your application.

Is Prior Approval from RBI Necessary?

 
 

The transaction of selling your NBFC may need prior approval from the RBI before initiating the process. This approval is mandatory in certain cases only, as specified by RBI.

These situations are:

  • Whenever an NBFC is sold/bought/acquired/taken-over. Whether any changes have been made in the management structure or not.

  • The shareholding has changed. At least 26% acquisition or transfer of the paid-up equity capital of NBFCs has taken place. It may have happened over a period of time.

    **Except when the buyback of share capital or reduction in it has been approved by a judicial body or a court of law.

  • When 30% or more Directors have been replaced or the management has seen alterations.

    **This 30% excludes Independent Directors. And if the change is due to a rotation of Directors, it is excluded from the requirement of approval from RBI.

Please note: If the proper documents have not been submitted with the application, on time, it shall be considered null and the transaction will be considered cancelled.

Requirement of Prior Public Notice about Changes

 
 

After RBI has approved for selling your NBFC, a public notice is to be given in one leading national and one leading local vernacular newspaper. The notice must be published at least 30 days prior to the date when the actual sale is planned. Giving enough time for the public to raise an objection, if any. The notification must mention the details of sale of shares, or transfer of control, is about to take place.

RBI requirements about the notification are:

Frequently Asked Questions

What is an NBFC?
How to sell an NBFC?
What is the process of NBFC sale?
What does Prior Approval from RBI mean?
How to take Prior Approval from RBI for NBFC Sale?
Is Prior Approval required when an NBFC is sold to another NBFC?
Is Prior Approval from RBI required is an NBFC is sold to a company which is not an NBFC?
Is Prior Approval mandatory for amalgamating or merging two NBFCs?
Can an NBFC pre-pay its deposits?
Is Prior Approval from RBI required before approaching any Court or Tribunal to seek orders for merger/amalgamation?
Does acquisition/ 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 from RBI?