Process of NBFC Takeover in India

NBFC is the financial institution that is registered under the Companies Act,2013 and regulated by RBI Act,1934. Before starting any financial activities business entity, they have to get a certificate of registration from RBI. Financial Activity includes loans, advances, asset financing shares, debentures, and other market securities. NBFC takeover is a process of acquiring a functioning RBI registered NBFC and not going for the NBFC registration process from the initial stage. NBFC takeover is a suitable but complex process. This process is suitable for individuals or corporates who want to opt for a speedy and confirmed functioning of their financial business.


Parties Involved In NBFC Takeover Procedure

  • Acquiring Company: Generally, these are the company that acquires the other company by buying all the assets and liabilities of the company. The acquiring company become the new owner of that company.
  • Target Company: Generally, these are the companies whose assets and liabilities are acquired by the acquiring company

    Types Of NBFC Takeover

    There are two types of takeover i.e.

    • Friendly Takeover
    • Hostile Takeover
      • Friendly Takeover: Generally, it is a type of takeover which takes place between two companies with their mutual consent. The acquirer company offers and the target company will accept the offer. This type of takeover increases the business field which leads to the growth of the business.
      • Hostile Takeover: This type of takeover is done by using different types of tactics. This will be done by directly going to the shareholders or a fake fight to change the management. These are the takeovers that are without the mutual consent of the target company.

    Advantages Of NBFC Takeover

    • Revenue and sales will come up
    • The profits of the Target company will hike up.
    • The vast expansion of distribution channels.
    • Reduces the level of competition.
    • The economy scale shows a positive and upward trend.

    Documents Requirement for NBFC Takeover

    The documents necessary for takeover are as follows:

    • Material regarding sources of funds of the proposed shareholders required for acquiring shares in the NBFC;
    • Material about the Proposed directors or shareholders;
    • A declaration from every proposed directors or shareholder stating their non-association with any entity which has been denied by the RBI;
    • A report from all the proposed directors or shareholders affirming their non-association with any entity which accepts deposit;
    • Moreover, a report by all the proposed shareholders or directors, qualifying their non-criminal background as well as non-convicting background under section 138 of the Negotiable Instruments Act;
    • Bankers’ Report of all proposed directors/ shareholders

    Procedure Of NBFC Takeover

    • NBFC will take the approval from RBI before transferring or acquiring control of the company.
    • Then NBFC will submit an application to the bank on the letterhead of the company to get approval. With the following documents:
      • Details of directors/ shareholders.
      • Source of funds of proposed shareholder acquiring a share in NBFC.
      • Various Declarations of directors and shareholders.
      • Bank report of all proposed directors/Shareholders.
    • NBFC will submit the application to the regional office. Under whose jurisdiction the registered office of NBFC is located.
    • The company will give public notice of at least 30 days before transferring the control to the shareholders or the management. The company will also publish the notice in the local or regional newspaper of the company.
    • After the approval from the RBI, the proposed company will sign an MOU. Both the acquiring company and the target company will sign it and will give a token amount.
    • Then the company will call a meeting for the approval of MOU and the schemes related to the takeover.
    • After that, the company will send the scheme to the transferor company for review after approval of the scheme.
    • Then the acquiring company will sign a share transfer agreement and will pay the remaining amount to the target company.
    • The target company will obtain NOC from the creditors and provide the certificate to the target company.
    • After obtaining NOC, the transfer of assets and liabilities will take place. The company should not go against any clause of the agreement.
    • For evaluating the present net value the company will do a cost assessment by using the Discount Cash Flow technique. The CA will give the certificate briefing the method used for the valuation of the company.
    • If an acquiring company has a 75% share under the scheme or contract they have the right to remove the minority shareholders. The company will give notice to minority shareholders to transfer the shares to acquiring company in form CAA 14.
    • Minority shareholders will get consideration within one month from the transfer of the share.

    Procedure For Change In Name After Takeover

    • The acquirer company needs to get a name availability certificate from the Ministry of Corporate Affairs.
    • RBI will give notice of default to the company.
    • After obtaining notice of default, the company can proceed to change the name.

    NBFC Takeover In India

    Mergers and takeovers have left a mark in the corporate world. It has become a convenient source of business expansion in the short run. After seeing the efficiency of the takeover process, RBI has given importance to the incorporation of takeover in NBFC. NBFC takeover helps those companies who failed to register as an NBFC. As per RBI only that NBFC can go for the takeover which is registered under the Companies Act,2013


    Generally, the takeover procedure is easy than the registration of NBFC. Although, the takeover procedure is at starting stage in India. RBI has made the plan systematic and easy. The acquirer company will provide details to the transferor company so, that there is no delay in the takeover procedure. With the change in scheme, RBI has given freedom in the compliance and governance of takeover procedure.


    CS Madhavi Singh Rajawat is a commerce graduate from IIS University, Jaipur and an associate member of Institute of Company Secretaries of India. She is also an LLB aspirant. Her interest lies in the field of corporate and securities laws, general corporate advisory matters and FEMA matters and compliances, litigation services, and also in NCLT related services. She has proficiency in the drafting of documents

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