Core Investment Company

Core Investment Company

A core investment company is an entity which is engaged in carrying out activities related to investing in shares, securities, investments in particular group of companies. It is crucial to secure registration for starting a core investment company.

Package inclusions:
  • Procedure for Establishment of a Core Investment Company
  • Documentation Requirements for a Core Investment Company
  • Liaising with the concerned authority for registration of CIC
  • End-to-End Support
Core Investment Company

Core Investment Company- An Overview

A Core Investment Company (CIC) is categorized as a Non Banking Financial Company (NBFC) by the Reserve Bank of India (RBI). These companies predominately invest in shares of its own group companies for stake holding purposes, but cannot engage in trading of these instruments or carry out any other kind of financial activity.

Such companies have their investment in shares for the purposes of not carrying out any form of activities related to trading. Such investment in shares is mainly carried out for the purpose of holding stake in the group companies.

So these companies have majority of their investment in group companies. Usually about 90% of the equity is present in the group of companies. Such stake holding is in the form of equity shares, preference shares and other form of shares. Such holding or component related to holding must not be less than 60% of their assets.

Though these companies are regulated by RBI, they do not take part in any form of activities relating to borrowing and lending. Until the year 2010 these companies were coming under the same regulation related to NBFC. However, in 2010 the RBI brought out a separate framework for governing the working of Core Investment Companies.

Definition of Core Investment Company

The following are the definitions of a core investment company:

  • RBI has classified this form of company as a NBFC which carries on activities relating to investing in shares and securities.
  • Such companies hold the investments in the form of equity, preference shares, debts and loans. Such investment amounts to 90%.
  • Such investment in the form of equity in group of companies must come to or comprise more than 60% of its total asset size.
  • Such activities related to trading of investment are not allowed to be carried out for Core Investment Companies. However these companies can carry out transactions such as divestment or dilution.
  • Mostly these companies only carry out investment activities such investment can be made in other financial institutions, government securities, money market securities and other forms of instruments.

Main Regulatory Authority for Core Investment Company

Core Investment Company also known as a CIC is an entity or a company primarily engaged in carrying out investment activities. Majority of the investment is carried out in shares of the company. Such Core Investment Company is a Non-Banking Financial Company which is regulated by the RBI under Chapter III B of the Reserve Bank of India Act, 1934.

Benefits of Forming a Core Investment Company

The following are the benefits of forming a core investment company:

Benefits of Forming a Core Investment Company
  • Carry out Investment

    By forming this company; the entity can carry out different forms of investments in shares, equity, loans and other forms of instruments.

  • Compliance with RBI

    By complying with the norms related to RBI this form of company would be established. Such company is formed in compliance with the norms related to RBI. However, the RBI has considered making a separate regulation for CIC in India.

  • Systematic Core Investment Company

    Such form of company is formed as an entity which assets size is more than Rs 100 Crore.

Categories of Core Investment Company

Core Investment companies cannot accept deposits. This is one of the basic eligibility criteria of a Core Investment Company. The asset classification norms for CIC's are:-

Categories of Core Investment Company
  • Registered CIC’s with assets less than Rs. 100 crore worth follow the norms specified in the Non-Systematically Important NBFC Prudential Norms, 2015.
  • For those with assets more than Rs. 100 core follows the norm as specified in Systematically Important NBFC Prudential Norms Directions, 2015.’

Approval Requirements for Core Investment Company

CIC's with asset size of Rs. 100 crore or more are treated as systemically important Core Investment Company (CIC-ND-SI) by RBI. All Core Investment Companies are required to be registered with the Reserve Bank of India under section 45 IA of the RBI Act 1934 and thereby obtain a Certificate of Registration.

Exemptions from Registration

  • CIC’s that have an asset size of less than Rs. 100 crore is exempted from registration as per the Act. The aggregate asset size of a Core Investment Company is calculated by totalling individual sizes of all the CIC’s belonging to a particular group. In case the total asset size is Rs. 100 crore or more the Core Investment Company has to register.
  • CIC’s that are worth Rs. 100 crore or more but are not accessing public funds are exempted.

    However, it is important to note here that such CIC’s that have asset size below Rs. 100 crore would be required to mandatorily register with RBI in case they are planning to make overseas investments in the financial sector. They also need to comply with all the requirements and conditions as applicable to registered CIC-ND-SI. However, if the particular Core Investment Company is investing overseas in the non-financial sector, it does not require to be registered with RBI.

    As per the Act, all Core Investment Companies that have asset size of less than Rs. 100 crore would be required to apply for the certificate of registration within a period of 3 months from the date of achieving Rs. 100 crore in the balance sheet.

General Obligation for a Core Investment Company

As per the Core Investment Companies (Reserve Bank) Directions, 2016, the following need to be fulfilled by all CICs, as per the last audited balance sheet:-

  • The Core Investment Company needs to hold not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies. The balance 10% of Net assets that the CIC’s can hold outside the group include real estate or other types of fixed assets that are essential for running the company but cannot be financial investments or loans in non-group companies.
  • The investment of the company in the shares of the group companies need to be at least 60% of the net worth of its assets.
  • The company can issue guarantees on behalf of group companies.
  • It can invest in bank deposits; money market mutual fund, liquid mutual funds, and other money market instruments; government securities; bonds and debentures of group companies; and granting of loans to group companies.

    A CIC-ND-SI that is a systematically important Core Investment Company needs to have an asset size of Rs. 100 crore and more, should raise or hold public funds as well as fulfil all the criteria stated above. For such a company, it is mandatory to be registered with the Reserve Bank of India as operating without obtaining a Certificate of Registration from the apex bank; they are viewed as violating the Core Investment Companies (Reserve Bank) Directions, 2016.

Procedure of Registration of Core Investment Company

  • The applicant needs to download the application form for registration from the website of RBI. The application form link can be found https://rbidocs.rbi.org.in/rdocs/Forms/PDFs/CIC260411F.pdf .
  • It needs to be filled in and submitted to the Regional Office of DNBS (Department of Non-Banking Supervision) along with the supporting documents as mentioned in the form. The DNBS has to be the one under whose jurisdiction the company is registered.
  • Such application must be accompanied with the checklists pertaining to the documentation required for core investment company registration.
  • If the RBI requires more documents to be submitted, the same can be called by RBI. In case the requirement of documents, the applicant has to submit the documents within 30 days of the notification.

There are companies that are exempted from registration, however these companies have to pass a Board Resolution that they will not in the future indulge in accessing public funds.

What is the Capital Requirements of a CIC-ND-SI?

  • The adjusted net worth (ANW) of the CIC-ND-SI cannot be less than 30% of the risk-weighted assets (RWA).
  • In situations where the aggregate asset size is calculated, it is required that all the CIC’s within the group need to be registered as individual CIC-ND-SI, the adjusted net worth being applied individually.
  • Such adjusted net worth can be understood as an aggregate of the funds as defined under the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (RBI) Directions which are issued in the year 2007.
  • Apart from this 45% of the amount which is considered as standing of credit related to the revaluation reserve:

    Such reserve can either be increased by or reduced by a particular amount.

  • Market Value of the Investment- Such would be the current value or the prevailing value of the price which is quoted by the investment. This must be 26 weeks before the preceding financial year.
  • Leverage Ratio- The amount of outside liabilities must not exceed 2.5 times the amount of adjusted net worth.

Rules related to the Operation of Core Investment Company

There are specific rules which are brought out related to the Operation of a Core Investment Company:

  • The entity or company has to mandatory secure registration requirements with the RBI.
  • The company has to have the minimum capital ratio related to registration requirements.
  • The entity must maintain records related to carrying out investment activities.
  • Such investments must be classified or diversified as long term investments and short term investments.
  • Any investment must be quoted, at a particular market value or the value which is determined.
  • Specific standards related to the ICAI have to be adhered when it comes to long term investments.

Documents Required for Core Investment Company Registration

The following documents are required for registering as a Core Investment Company:

  • Particulars relating to the company- Certificate of Incorporation (Copy)
  • Memorandum of Association and Articles of Association (MOA and AOA)
  • Application form related to the registration
  • Photocopy of the Application must be kept with the registered office of the company
  • All signatures related to the key management executive must be present in the application. Along with this the common seal of the company must be present in the application.
  • Information on the Directors (DIN) and Executives of the Company
  • CIN Number of the Company
  • PAN Information related to the Company
  • Activities which are carried out by the Core Investment Company (Information on)
  • Particulars relating to the statement of funds which are required for carrying out the activities as mentioned by the CIC
  • Information on Net Assets which are handled by the Company
  • Information on the Amount of Liabilities handled by the entity
  • Information related to the adjusted net worth of the Business and Weighted Risk Assets

Enterslice Advantage- Core Investment Company Registration

  • Enterslice main aim is to add value to you business.
  • Our team of expert professionals comprise of Chartered Accountants, Company Secretaries, Lawyers, and Financial Executives.
  • We have carried out many services pertaining to NBFC registration.
  • Constant monitoring and 24*7 customer service.

How to reach Enterslice for Core Investment Company Registration

1. Fill up the online form.

2. One of our professionals will get back to you.

3. All queries can be addressed to one of our experienced professionals

4. Track and monitor the progress of your application.

5. Get Deliverables.

FAQ

The meaning of systematic core Investment Company known as SI-CIC is a company which considers investing in a particular amount which is more than 100 crore.

Usually the core investment company would carry out activities related to the acquisition of shares and other forms of investment activities.

For the purposes of understanding CIC/CIC-ND-SI group companies are those companies that involving two or more entities related to each other through any of the following relationships, viz.,Subsidiary – parent, joint venture, subsidiary, associate, promoter and promote company or any form of listed company under the relevant company regulations.

For such application, the applicant has to go online to the RBI website to make an application for registration.

Usually the aggregate turnover would be considered to determine the 100 crore.

Net assets would be the amount of total assets which are considered for carrying out the investment.

Yes a CIC with net assets of more than 100 crore needs to register with the RBI.

Net assets would only include the amount of investment which is classified as net assets. Any form of operating assets would not be qualified as a net asset.

No activities relating to accepting of deposits cannot be carried out by a CIC-ND-SI.

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