Sell NBFC2020-09-25T05:42:48+00:00

Sell NBFC


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NBFC

 
 

NBFCs, the companies established under the Companies Act, are granted the NBFC License by the Reserve Bank of India (RBI). NBFCs are intermediaries engaged in providing finances as their primary business. They accept deposits, lend finance and play a vital role in channelizing the limited financial resources into infrastructure development and create chances of earning. They complement the organized banking sector by attending to the ever-increasing financial needs of the corporate sector, delivering credit to the unorganized sector and small unbanked borrowers. However, they cannot be involved in agricultural activity, industrial activity, sale, purchase or construction of immovable property.

The financial services by NBFCs include disbursement of loans, acquisition of stocks/shares/ bonds, etc. NBFCs focus on loans and advances, acquisition of shares, bonds, debentures, stocks, securities issued by the government/local authority or other similar marketable securities, leasing, insurance business, hire-purchase, etc.

To Sell NBFC

 
 

RBI has specified a guide in detail to be undertaken for the sale of NBFC in India. Therefore, there is no scope of any ambiguity about buying or selling.

The sale of NBFC would involve two parties and involves a series of transactions between the seller and the buyer. According to RBI, an NBFC can only be sold to another NBFC or an established company – not any other kind of entity. A sale transaction would merge these two companies into one. The buyer or the Acquirer Company would procure either (i) the equity of the Seller NBFC to obtain the voting powers to be able to select the Board members, or (ii) at least 30% of the management. At the time of handing over an NBFC, its balance sheet has to stand at null & void and all assets & liabilities transferred to the Acquirer.

To sell your NBFC, you need a buyer or an Acquirer Company ready to buy it.

And experts advise to have all the agreements & details of the deal with the Acquirer in written, to avoid any confusion and uncertainty.

Process of Selling NBFC

 
 

To sell an NBFC and getting RBI approval for the change in its management takes approximately 2-3 months. Therefore, it is advised to check the credential of Acquirer Company and make sure that the agreement with it will hold good during this period.

Is Prior Approval from RBI Required?

 
 

Before selling your NBFC, first, you must check whether the transaction needs prior approval from the RBI or not. Certain cases have been specified by RBI when the sale transaction needs its approval before the process is initiated.

The situations specified by RBI, where prior approval is mandatory, are given below. And if proper documents are not submitted, the application shall be considered invalid and the transaction considered cancelled.

  • Whenever an NBFC changes hands. Whenever it is sold/acquired/bought/taken-over, whether any changes in management occur or not.

  • The shareholding structure has changed, ending in at least a 26% change in the ownership of the paid-up equity capital of NBFCs. This may have happened over some time.

    **Except when the capital being reduced or buyback of the shares has been approved by a judicial body.

  • Management structure has been modified, by changing at least 30% of the Directors.

    **This 30% excludes Independent Directors. If the change has been due to a regular rotation of Directors, approval from RBI is not required.

RBI Approval to Sell NBFC

 
 

As mentioned above, the sale/takeover/merger or certain other changes in the Board of Directors of an NBFC requires prior approval from RBI. All documents to be submitted to RBI must be filed with an understanding of the Acquirer Company.

  • An application and a cover letter, on Company’s letterhead, are to be submitted to the regional office of RBI having jurisdiction where your NBFC is situated.

  • Details about the proposed Directors/shareholder members, their KYC, ID/address proof, education & qualification proofs are to be enclosed with the application.

  • The sources from where the Acquirer is arranging the funds needed to buy your NBFC.

  • Statement by the proposed Directors/shareholders declaring that they have not been involved 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 have not been involved with any such company, which was rejected for a Certificate of Registration (CoR) by the RBI.

  • Statement by the proposed Directors/shareholders that there is no criminal trial against them, pending or convicted. Including an offense under Section 138 of the Negotiable Instruments Act.

  • Clean Banker’s Report on the slated Directors/members.

  • Financial Statements and Annual Reports since the registration of your NBFC or past three years, whichever is more.

  • Apart from above, a public notice is to be given, at least 30-days prior to the planned date of the sale of, or transfer of the ownership by the sale of shares, or transfer of control, individually or jointly by the parties. This notice is to be published in at least one national daily and one vernacular daily newspaper.

Once the above documents are ready, the application is to be filed with the Regional Office of the DNBS (Department of Non-Banking Supervision) of RBI, under whose jurisdiction your registered NBFC office comes. RBI may need some explanations or put up inquiries on points mentioned in the application and other documents. These must be resolved, well in time, to avoid any undue delay from RBI to process the application.

Requirements of Prior Public Notice about Changes

 
 

After getting RBI’s approval for the sale, a public notice is to be given in one leading national daily and another in a leading vernacular daily newspaper at least 30 days before the date when this transaction is about to take place. It indicates clearly that such a sale of shares, or transfer of control, so that the members of the public can raise objection, if any.

The provisions are:

Why CompanyRegistrationOnline to Sell NBFC

 
 

Selling, buying or registering an NBFC, all such transactions are under strict regulations of RBI. All the compliances set-up by RBI in this regard must be duly fulfilled. This means that the Seller is not to make any mistakes or delay in providing any information to RBI or the Acquirer. All the provisions to complete the process successfully are to be thoroughly adhered to.

Therefore, CompanyRegistrationOnline is the best trustful companion for this journey. Having more than 10-years of experience in legal compliance, our skilful executives shall complete all requirements successfully – RBI regulations, accounting, and reporting. We also help with reconstituting NBFCs.

Your pain is over after a detailed telephonic consultation with the professional in charge of your deal. This makes us understand your requirements and goals. According to the price you are looking for, we’ll select and advise you about the companies willing to buy your NBFC.

Once you have finalized the buyer, together we go through the compliances & legal requirements, forms to be filed, information/paperwork to be completed, etc.  Now, just relax. Let CompanyRegistrationOnline, your committed partner, commence the process of the sale, with RBI and the government.

You can hire us for:

  • Mergers/Demergers/Amalgamations

  • Contract Drafting

  • Approval for Management Change from RBI

  • Preparing Share Purchase Agreement

  • Meeting RBI Compliance

  • Internal Audits

Frequently Asked Questions

What is an NBFC?
How to sell an NBFC?
What is the procedure to sell an NBFC?
What is meant by Prior Approval from RBI?
How to take Prior Approval from RBI for NBFC Sale?
Is Prior Approval required when an NBFC is bought by another NBFC?
Is Prior Approval from RBI required is an NBFC is bought by a company that is not an NBFC?
Is Prior Approval necessary for amalgamating or merging 2 NBFCs?
Can an NBFC pre-pay its public deposits?
Is Prior Approval from RBI required before approaching any Court or Tribunal for seeking orders for merger/amalgamation?
Whether 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 need prior approval from RBI?