{"id":8719,"date":"2018-04-18T14:39:14","date_gmt":"2018-04-18T09:09:14","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=8719"},"modified":"2020-12-31T15:10:35","modified_gmt":"2020-12-31T09:40:35","slug":"change-in-management-of-nbfc","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/change-in-management-of-nbfc\/","title":{"rendered":"How to Process Change in Management of NBFC"},"content":{"rendered":"<h2 class=\"wp-block-heading\">Change in Management of <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;NBFC&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Non-Banking Financial Companies (NBFC) operate similarly to banks but do not possess the legal status of a bank. Registered under the Companies Act 2013 and governed by the RBI Act&amp;#039;s section(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/nbfc\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>NBFC<\/a><\/h2>\n\n\n\n<p class=\"has-drop-cap\"><em>NBFC is a Non-Banking Financial Company, the principal (Change in Management of NBFC) business of which is: <\/em><\/p>\n\n\n\n<ul><li>lending money or<\/li><li>investing in shares\/stocks\/bonds\/debentures or<\/li><li>leasing hire purchase, or<\/li><li>doing insurance business, chit business or<\/li><li>Receiving deposits under any scheme or arrangement.<\/li><\/ul>\n\n\n\n<div class=\"shadow4\"><strong>NOTE: NBFC is regulated by Reserve Bank of India.<\/strong> <\/div>\n\n\n\n<p>Change in management of NBFC happens now and then, due to situations such as resignation, death, retirement or takeover. Thus, Change in management in <a href=\"https:\/\/enterslice.com\/nbfc-registration\">NBFC<\/a> requires Strategic review of the proposal, the Due diligence of the target company, <strong>MoU<\/strong> between the target company and acquirer, Plan for ICD during a change in the management process, Nod from RBI for Change in management and MCA Compliance for Change in management.<\/p>\n\n\n\n<div class=\"shadow1\"><strong>Before any change in the management, Reserve Bank specifies the conditions for which prior approval of the bank is required:<\/strong> <\/div>\n\n\n\n<ul><li>Any takeover or acquisition of NBFCs, resulting in a change of management;<\/li><li>Any change in the shareholding pattern resulting in acquisition\/transfer of 26% or more of the paid-equity capital.<\/li><li>More than 30 % <a href=\"https:\/\/enterslice.com\/change-in-directors\"><strong>change of directors<\/strong><\/a>, excluding independent directors.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">The above conditions are subject to the following exceptions:<\/h3>\n\n\n\n<ul><li>When there is a change in shareholding, due to the order of competent authority, it is mandatory for a company to inform RBI within 30 days of the occurrence.<\/li><li>When the director of the company gets re-elected by rotation, then prior approval is not required.<\/li><\/ul>\n\n\n\n<p>Further, RBI states that all NBFCs shall intimate regarding the change in management as required by law.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">NBFCs Change in Management<\/h2>\n\n\n\n<p>Where there is any change in management, NBFC is required to submit an application to Reserve Bank of India on the letterhead of the Company, along with the requisite documents:<\/p>\n\n\n\n<ul><li>Information about change of proposed directors\/ shareholders;<\/li><li>Detail of source of fund for acquiring the shares in NBFC of the proposed <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Shareholder&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A shareholder is an individual or entity that owns at least one share of a company&amp;#039;s stock, granting them partial ownership of the company. This status allows them certain rights, including(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/shareholder\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>shareholder<\/a>;<\/li><li>The proposed director\/shareholder must provide a statement no criminal record, or offenses under section 138 of the Negotiable Instrument Act.<\/li><li>The proposed director\/shareholder must provide a statement for non-involvement with a company whose application for Certificate of Registration was rejected by RBI;<\/li><li>Proposed directors\/ shareholders banker&rsquo;s report<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">The requirement of Public Notice in case of Change in Management<\/h2>\n\n\n\n<p>When there is any sale, transfer of ownership, merger or any <strong>Change in management of NBFCs<\/strong>, a public notice shall be given at least 30 days prior. Such public notice shall be given by the concerned NBFC as well as the other party to the transaction. The notice should be published in 2 newspapers, of which one should be in the English language and other in a regional language where the registered office of the company is situated. The Notice should clearly specify the intention of such a change in management.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Information to be provided to the Reserve Bank of India<\/h2>\n\n\n\n<p>The proposed directors\/shareholders of the company should provide appropriate information in Annexures provided by <strong>Reserve Bank of India<\/strong><sup><a href=\"https:\/\/www.rbi.org.in\/\">[1]<\/a><\/sup>. This information should be completely and accurately filled. Any incomplete information will be rejected and the approval process may be delayed.<\/p>\n\n\n\n<p>The objective of the Reserve bank of India is to attain maximum transparency and efficiency in the workings of the financial <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>market<\/a>. Previous written consent of the Reserve Bank is a need for any takeover or acquisition of control of an NBFC, which may or may not result in a change of management. Due to the rise of NBFCs in the financial and credit market, RBI plays pivotal role assuring the workings are uninterrupted.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/enterslice.com\/learning\/change-nbfc-name\/\">NBFC: Change NBFC Name in India<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Change in Management of NBFC NBFC is a Non-Banking Financial Company, the principal (Change in Management of NBFC) business of which is: lending money or investing in shares\/stocks\/bonds\/debentures or leasing hire purchase, or doing insurance business, chit business or Receiving deposits under any scheme or arrangement. NOTE: NBFC is regulated by Reserve Bank of India. [&hellip;]<\/p>\n","protected":false},"author":4,"featured_media":8722,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1383,6],"tags":[1381,35],"acf":{"service_id":"8"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How to Process Change in Management of NBFC? 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