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RBI is putting strict regulations on NBFCs. Since NBFC deals with financial activities it is essential to ensure the fit and proper character of the management of NBFCs. Therefore, RBI had issued guidelines to deal with the change in control or management of the NBFCs. In this article, we will discuss the Change in Shareholding Pattern of NBFC.
Table of Contents
RBI had issued the Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014 (2014 Directors), requiring NBFCs to seek prior approval from the RBI prior to effecting any change in control or management of the NBFC.
The above directions are applicable to every NBFC whether accepting public deposits or not, but does not include primary dealers.
As per the definition, “control” includes the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.
Thus, to summarise, any direct or indirect change in the company resulting in the change of the following would amount to change in control:
Prior written permission of the RBI shall be required in the following circumstances:
However, in the second instance, even though the shareholder is acquiring only 16%, but in aggregate its shareholding is reaching the threshold; hence, a prior approval of the RBI would be required for the acquisition of 16% of paid up equity capital.
Read our article:NBFC: Things to know before Incorporating this Financial Institution
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