NBFC

NBFC

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, etc.

The activities they can be engaged in, are:

Loan and credit facilities

Asset Financing

Acquisition of shares/stocks/bonds

Hire-purchase

Insurance business

Chit Fund business

Hedge funds

Currency exchange

Peer to peer lending

about-finbiz

Buy an NBFC

If you want to buy NBFC online in India, you can choose between two options:

PAN Card copy of proprietor.

Electricity/ Water bill (Business Place)

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.NBFC has been put up for sale, and you have the chance to buy NBFC online in India. Or, if you have zeroed in on an NBFC to buy, which is not on sale, you can do so by acquiring its control via deliberate 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 of its 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, then 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

When purchasing an NBFC, confirm that you do not require prior RBI approval to buy NBFC online in India for chosen. 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 try to avoid any undue delay or cancellations from RBI, to process your application.

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:

Verify that only legally valid documents are being submitted to the RBI and/or other authorities.

Review all previous records, such as liability (if any). Starting from the beginning years of the Target NBFC or at least the financial statements of the last 3-years.

Check if any cases are pending against the company, any legal proceedings taken-up against it, etc. And all other such details that may influence the decision of acquiring this NBFC.

Examine all the registration certificates, such as PAN, GST, Certificate of Incorporation, and all other certifications availed during the existence of the company.

Check KYC of the Directors, promoters, investors presently associated with the NBFC.

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. 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.