Core Investment Company Registration Procedures

Narendra Kumar

23 Jul, 2019

Core Investment Company registration is one of the tedious job and CIC License is mandatory for certain class of investment company.

What is Core Investment Company (CIC)?

Core Investment companies are companies who hold shares, bonds debentures and is categorized as NBFCs by the RBI.

CIC is a non-banking financial company who carries business acquisition of shares and securities.

Conditions to be fulfilled by CIC:

The process of Registration of Core Investment Company:

Every Company who want a certificate of CIC shall apply for systemically important Core Investment Company (CIC-ND-SI).

Now, what is CIC-ND-SI?

CIC-ND-SI means a core investment company who shall have total assets of not less than ₹100 crore either individually or in aggregate along with other CICs in the Group and which raises or holds public funds.

CIC Registration Procedure:

• Every CIC-ND-SI shall apply to the Bank for grant of Certificate of Registration, irrespective of any advice in the past, issued by the Bank, to the contrary.
• After becoming a CIC-ND-SI, CIC can apply to the Bank for grant of Certificate of Registration within a period of three months from the date of becoming a CIC-ND-SI.
• However, CIC who are exempted from registration requirement with Bank shall pass a Board Resolution that it will not, in the future, access public funds.
• On behalf of the group company, CIC may require to issue guarantees or take on other contingent liabilities. CIC must ensure the obligations before taking such liability.
• CIC who has asset size above ₹100 crore and access public funds without obtaining a Certificate of Registration (CoR) from the Bank, they shall be seen as violating Core Investment Companies (Reserve Bank) Directions, 2016.

Also, Read: All You Must Know About Semi-Closed Wallet

Capital Requirements:

Adjusted Net Worth of a CIC-ND-SI shall at not be less than 30% of its aggregate risk weighted assets on balance sheet and risk-adjusted value of off-balance sheet items as on the date of the last audited balance sheet as at the end of the financial year.

In above, Adjusted Net Worth means the aggregate of owned found appearing in the last audited balance sheet as at the end of the financial year. Wherein owned fun means paid-up equity capital, preference shares which are compulsorily convertible into equity, free reserves, balance in share premium account and capital reserves representative surplus rising from sale proceeds of asset, which exclude reserves created by revaluation of asset, as reduced by accumulated loss balance, book value of intangible assets and deferred revenue expenditure, if any.

In above requirement on balance sheet and off-balance sheet are as defined in the notification of RBI.

Overseas Investment:

In addition to provisions by Foreign Exchange Department for overseas investment, the following conditions shall be fulfilled by CIC.

Investment in financial sector overseas:

• Prior approval from the Bank is required by CIC for investing in Joint Venture/Subsidiary/Representative Offices overseas in the financial sector.
• CIC shall hold a Certificate of Registration (CoR) from the Bank and shall comply with all the regulations applicable to CIC-ND-SI.
• Exempted CIC whose propose is to make overseas investment in the financial sector shall require to register with the Bank and shall be regulated like CICs-ND-SI.

Investment in the non-financial sector:

• CICs who are exempted from taking registration is making overseas investment in the non-financial sector shall not require registration from the Bank.
• CIC-ND-SI need not obtain prior approval from Department of Non-Banking Supervision (DNBS), RBI, for overseas investment in the non-financial sector.
• On other hands, Company0 shall report to the Regional Office of DNBS where it is registered within 30 days of investment in the stipulated format and at the prescribed periodicity.

Eligibility Criteria:

• The Adjusted Net worth (ANW) of the CIC shall at least30% of its aggregate risk weighted assets on balance sheet and risk-adjusted value of off-balance sheet items as on the date of the last audited balance sheet.
• The CIC shall continue to meet the requirement of minimum ANW, post overseas investment.

General Conditions:

• Direct investment in activities prohibited under FEMA shall not be permitted.
• The total overseas investment shall not exceed 400% of the owned funds of the CIC.
• The total overseas investment in the financial sector shall not exceed 200% of its owned funds.
• Investment in the financial sector shall be only in regulated entities abroad.

Reporting Requirements

The reporting requirements prescribed by Department of Non-Banking Supervision in respect of CIC-ND-SIs shall have adhered to applicable RBI & other laws.