NBFC Takeover happens when the company aiming to acquire makes a bid in an attempt to assume control over the target company it is done by purchasing a majority stake in the company. According to RBI guidelines, before acquiring any NBFC company, the acquirer requires prior approval from RBI. An application has to be made on the letterhead of the company which has to be submitted to the regional office.
Before acquiring any NBFC company the acquirer company has to file an application to RBI in their letterhead, but certain takeovers are kept out of the purview of the terminology takeovers by RBI, and hence no prior approval is necessary in that case. Such cases involve takeover with minor changes in the management of the NBFC of the company.
Prior approval from the Reserve Bank of India is necessary for the following conditions only.
• Whenever the acquisition or takeover results in a major change in management.
• If any amendment is made in the management and that change result in management leads to more than 30% change of directors of the company acquired.
• If the deviation in shareholding leads to 26% transfer of the paid-up capital of the NBFC, then prior approval is necessary
Related: Different Types of NBFC
Documents to be submitted to RBI are KYC documents, the projection for three years is to be prepared with reference to incoming directors which is suggested by the acquirer
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All Sources of funds received by the proposed shareholders acquiring the shares in the NBFC should be declared;
The takeover of NBFC Company is easier than the registration of a new NBFC company as RBI has made takeover procedure simpler than before. Although the NBFC takeover procedure is in its starting stage In India RBI has made sure that the procedure for registering and acquiring an NBFC is systematic and Comprehensive.
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