NBFC Sale India
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- Genuine Buyers
- Contract Drafting
- All RBI Provisions Complied With
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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:
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
These financial institutions are entitled to accept deposits, in lump sum or instalments, under different plans. Though their activities are quite similar to banks, yet there are differences between both these entities.
• First, search for a trustworthy buyer.
• Do a thorough check on this company (or NBFC) to ensure it is genuine.
• The buyer will advise on how it wants to acquire your NBFC. By taking over the management or shareholding.
• Check if Prior Approval stipulations of RBI apply here or not.
• Public to be notified of the planned transaction in at least 2 leading daily newspapers. One national and the other vernacular.
• Apply for RBI’s approval, with the required documents, at its nearest regional office.
• Publish again in 2 leading daily newspapers.
• Solve all the objections raised.
You can take the hassle-free road. Simply get registered with CompanyRegistrationOnline. Best assistance assured.
RBI clearly specifies certain situations when its approval is necessary, before an NBFC sale can take place. Therefore, first, check whether prior approval from RBI would be required for sale of your NBFC. Or would it be exempt from such a requirement?
The situations are:
• Whenever NBFC ownership changes. Whether the management structure has changed or not.
• The shareholding structure has changed. When 26% of the paid-up equity capital of NBFC or over, has been bought or sold. This may have happened over some time.
(Except if a competent court has approved of this buyback of the shares or reduction in the capital.)
• Management formation has changed. By changing 1/3rd or 30% or more Directors.
(Independent Directors are not included in this 30%, and approval from RBI is not required if the change is the result of a rotation of Directors.)
The application is to be sent to the Regional Office of the DNBS (Department of Non-Banking Supervision) of RBI, under whose jurisdiction, your registered office is located. The application to be accompanied by a cover letter, for the planned transaction of selling your NBFC is to be made on the letterhead of the company. Following documents are to be submitted, in agreement with the Acquirer Company:
1. Sources of funds that will be used by the Acquirer for buying your shares.
2. Details about the Directors/shareholders/members about to takeover. Their ID, Address proof, and Education/Experience proof, etc.
3. Declaration by the proposed Directors/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. Statement by the proposed Directors/members, that they do not have any criminal background and/or Non-conviction u/s 138 of the Negotiable Instruments Act,
5. Their statement declaring that they have not been associated with any unregistered entity accepting deposits,
6. Clean Banker’s Report of all the potential Directors/ shareholders.
The easier option will be to register your NBFC on the CompanyRegistrationOnline website. So that you get the best prices and the most hassle-free sale.
(i) shareholding of the NBFC is being changed, after the sale, which would result in a change of shareholding pattern of 26% or more of the paid-up equity capital of the NBFC
(ii) management of the NBFC is being changed, which would result in a change of more than 30% of the directors, excluding independent directors.
However, if a depositor expires, the NBFC may choose to repay the deposit, even during this lock-in period. This matter is at the discretion of the NBFC, at the request of the joint holders with survivor/nominee/legal heir and submits relevant proof.
1. An NBFC, not a problem company, subject to the above provisions, may permit this premature withdrawal. After the lock-in period gets over, at its sole discretion, at the rate of interest prescribed by RBI.
2. A problem NBFC is prohibited from making premature repayment of any deposits or granting any loan against public deposit/deposits, as the case may be. The prohibition does not, however, apply for the death of depositor or repayment of small deposits, up to an amount of Rs. 10000/-.