{"id":2828,"date":"2021-03-01T06:19:23","date_gmt":"2021-03-01T06:19:23","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=2828"},"modified":"2021-03-01T06:19:26","modified_gmt":"2021-03-01T06:19:26","slug":"procedure-for-nbfc-takeover","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/","title":{"rendered":"What is the Procedure for NBFC Takeover in India?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">With\nthe evolution of the new business model, the NBFCs or Non-Banking Financial\nCompanies are also observing many changes in their activities, regulations, and\nmanagement. The Reserve Bank of India or RBI is trying very hard to make the\nNBFC business smoother while recollecting compliance requirements. Worldwide\nmergers and takeovers are making its existence powerfully felt over the entire\ncorporate situation. Non-Banking Financial Companies are also under the impact\nof these agreements and negotiations. Based on the industry&#8217;s illustrations,\nthe Reserve Bank of India (RBI) lays down the procedure for <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-takeover-agreement\" class=\"text-primary\">NBFC Takeover in\nIndia<\/a><\/strong>. In this, we discuss the procedure for NBFC Takeover in India.<\/p>\n\n\n\n<p><strong>There are two different parts\nwhere you can begin your business in NBFC:<\/strong><\/p>\n\n\n\n<ul><li>NBFC Takeover of an already set business.<\/li><li>Incorporating NBFC under Companies Act.<\/li><\/ul>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a353ee42bd12\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a353ee42bd12\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Different_types_of_NBFC_Takeover\" title=\"Different types of NBFC Takeover\">Different types of NBFC Takeover<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Hostile_Takeover\" title=\"Hostile Takeover\">Hostile Takeover<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Friendly_Takeover\" title=\"Friendly Takeover\">Friendly Takeover<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#What_are_the_Pros_and_Cons_of_NBFC_Takeover_in_India\" title=\"What are the Pros and Cons of NBFC Takeover in India?\">What are the Pros and Cons of NBFC Takeover in India?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Pros_of_Takeover\" title=\"Pros of Takeover\">Pros of Takeover<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Cons_of_Takeover\" title=\"Cons of Takeover\">Cons of Takeover<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#What_is_the_Procedure_for_NBFC_Takeover_in_India\" title=\"What is the Procedure for NBFC Takeover in India?\">What is the Procedure for NBFC Takeover in India?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Memorandum_of_Understanding\" title=\"Memorandum of Understanding \">Memorandum of Understanding <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Prior_Approval_of_the_RBI\" title=\"Prior Approval of the RBI\">Prior Approval of the RBI<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Publish_the_Public_Notice_Bilingually\" title=\"Publish the Public Notice Bilingually \">Publish the Public Notice Bilingually <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Formal_Agreement\" title=\"Formal Agreement\">Formal Agreement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Publication_of_the_Second_Public_Notice\" title=\"Publication of the Second Public Notice\">Publication of the Second Public Notice<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Obtain_NOC_from_Creditors\" title=\"Obtain NOC from Creditors\">Obtain NOC from Creditors<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Assets_Transfer\" title=\"Assets Transfer\">Assets Transfer<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Entity_Valuation_in_Agreement_with_the_Rules\" title=\"Entity Valuation in Agreement with the Rules\">Entity Valuation in Agreement with the Rules<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-16\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Notice_to_Regional_Office\" title=\"Notice to Regional Office\">Notice to Regional Office<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-17\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Procedure_for_changing_name_while_NBFC_Takeover_is_under_process\" title=\"Procedure for changing name while NBFC Takeover is under\nprocess\">Procedure for changing name while NBFC Takeover is under\nprocess<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-18\" href=\"https:\/\/swaritadvisors.com\/blog\/procedure-for-nbfc-takeover\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Different_types_of_NBFC_Takeover\"><\/span>Different types of NBFC Takeover<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The\nNBFC Takeover has become a well-known habit that companies accept to touch new\nheights in today&#8217;s emerging business world. There are two types of NBFC\nTakeover in India.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Hostile_Takeover\"><\/span>Hostile Takeover<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In\na hostile takeover, the acquirer uses diverse tactics to acquire the target\ncompany&#8217;s ownership without the directors&#8217; nod associated with the target Non-Banking\nFinancial Company (NBFC). During such takeovers, entities get to reach out to\nshareholders by offering them a tender. There is no hesitation in indulging in\na proxy tussle to change the management to get the acquisition accepted. In a\nhostile takeover, the acquirer does not require the support and approval of the\ntarget company&#8217;s board of directors.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Friendly_Takeover\"><\/span>Friendly Takeover<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A friendly takeover is a scenario that illustrates the story of the acquisition of the target company peacefully by another company as this takeover is subject to the approval and assistance of the board of directors and the management. The target companies&#8217; shareholders agree to the deal only if they feel that the price per share is good compared to the present market price. Usually, a friendly takeover is likely to occur when the target companies are satisfied with the settlement they have overseen during the prior analysis time frame.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/what-is-the-process-of-acquiring-an-nbfc-types-of-nbfc-takeover\/\">What is the Process of Acquiring an NBFC? Types of NBFC Takeover<\/a><\/mark><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_are_the_Pros_and_Cons_of_NBFC_Takeover_in_India\"><\/span>What are the Pros and Cons of NBFC Takeover in India?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following\nare the pros and cons of NBFC Takeover in India:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Pros_of_Takeover\"><\/span>Pros of Takeover<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul><li>Revenue and sales are coming up.<\/li><li>Hiking up the profits of the targeted company.<\/li><li>The vast expansion of distribution channels.<\/li><li>Reduce the level of competition.<\/li><li>The economy scale is showing a positive and\nupward trend.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Cons_of_Takeover\"><\/span>Cons of Takeover<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<ul><li>Low employee morale.<\/li><li>Two different companies joining together,\ncultural clashes are sometimes unavoidable.<\/li><li>Rare management conflict.<\/li><li>In a few cases, the amount to be paid during the\ntakeover is less than the actual price.<\/li><li>After the merger, the masked liabilities of the\ntarget companies can be problematic in future.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Procedure_for_NBFC_Takeover_in_India\"><\/span>What is the Procedure for NBFC Takeover in India?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Below is the step by step procedure for NBFC Takeover in India:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/03\/Infographic-for-Swarit-Blog-5.png\" alt=\"Procedure for NBFC Takeover in India\" class=\"wp-image-2830\" width=\"539\" height=\"363\" srcset=\"https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/03\/Infographic-for-Swarit-Blog-5.png 912w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/03\/Infographic-for-Swarit-Blog-5-300x203.png 300w, https:\/\/swaritadvisors.com\/blog\/wp-content\/uploads\/2021\/03\/Infographic-for-Swarit-Blog-5-768x519.png 768w\" sizes=\"(max-width: 539px) 100vw, 539px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Memorandum_of_Understanding\"><\/span>Memorandum of Understanding <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The\nprocedure for NBFC Takeover triggers off from the <strong>MOU (Memorandum of Understanding)<\/strong> to get signed with the proposed\ncompany. It specifies that both the target and acquirer companies are ready to\nform a turnover agreement. The directors of both the companies have to sign the\nMemorandum of Understanding duly.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Prior_Approval_of_the_RBI\"><\/span>Prior Approval of the RBI<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>We\nknow that NBFCs are governed and controlled by the Reserve Bank of India. The\nconsent of the RBI (Reserve Bank of India) is an essential step. Approval is\nnecessary in the below-mentioned cases:<\/p>\n\n\n\n<ul><li>At the commencement of the takeover of a\nNon-Banking Financial Company procedure, RBI&#8217;s approval becomes mandatory.<\/li><li>When the shareholding pattern is changing by\nbecoming responsible for transferring 26% of the company&#8217;s paid-up capital to\nothers.<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Publish_the_Public_Notice_Bilingually\"><\/span>Publish the Public Notice Bilingually <span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Publication of the public notice must be done in two regional languages. The first language must be English, and the second language must be the regional language. The public notice must be published within 30 after receiving the approval from the Reserve Bank of India (<a href=\"https:\/\/www.rbi.org.in\/\">RBI<\/a>).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Formal_Agreement\"><\/span>Formal Agreement<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In\nthis step, two concerned companies\/parties can think of entering into a formal\ntakeover agreement. Now, the companies\/copies can transfer of administration,\ntransfer of shares, or earlier mentioned takeover concerns.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Publication_of_the_Second_Public_Notice\"><\/span>Publication of the Second Public Notice<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Publication\nof the second public notice must be done in two regional languages. The first\nlanguage must be English, and the second language must be the regional\nlanguage. The second public notice must be published before 30 days to purchase\ntransfer of authority, transfer of shares, or before-divulged apprehension for\ntakeover.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Obtain_NOC_from_Creditors\"><\/span>Obtain NOC from Creditors<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Before\nthe business is transferred, the target company must obtain a <strong>No Objection Certificate (NOC)<\/strong> from all\nthe company&#8217;s creditors.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Assets_Transfer\"><\/span>Assets Transfer<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Once\nthe takeover scheme is approved by the Reserve Bank of India (RBI) with no\nobjections, the assets are transferred.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Entity_Valuation_in_Agreement_with_the_Rules\"><\/span>Entity Valuation in Agreement with the Rules<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>\u00a0The RBI has prescribed a set of rules and regulations; the concerned entity&#8217;s valuation is made possible following prescribed rules and regulations. The <strong>DFC (Discounted Cash Flow)<\/strong> method is the procedure that supports in the valuation process. It is a method that is recognized for depicting the present net value of an entity.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Notice_to_Regional_Office\"><\/span>Notice to Regional Office<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>After\nthe approval and valuation of the Takeover scheme, NMFC shall apply to the\nRegional Office of Reserve Bank of India.<\/p>\n\n\n\n<p><strong>Following are the details\nrequired for the application made to the Regional Office of RBI:<\/strong><\/p>\n\n\n\n<ul><li>Details of shareholders and directors.<\/li><li>Sources of Funds of Acquirer.<\/li><li>A declaration by the shareholders and directors\nregarding their association with any entity which is accepting deposit.<\/li><li>Declarations by the directors regarding no\ncriminal records have been opened against them in the court.<\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Procedure_for_changing_name_while_NBFC_Takeover_is_under_process\"><\/span>Procedure for changing name while NBFC Takeover is under\nprocess<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>For changing the company&#8217;s name, the acquirer company must obtain the name availability certificate from the MCA (Ministry of Corporate Affairs). After that, the acquirer company needs to reach Reserve Bank of India (RBI) for <strong>Notice of Default (NOD)<\/strong>. Once the NOD is granted, the company can proceed further for the name change.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The procedure for NBFC Takeover in India is much easier than the registration of the new NBFC Company, but it is essential to know everything about NBFC Takeover in India. However, takeover sounds negative but is same as an acquisition. RBI has regulated the compliance and governance requirements for the procedure for NBFC Takeover in India. If anyone wants to apply for <strong><a href=\"https:\/\/swaritadvisors.com\/nbfc-registration\" class=\"text-primary\">NBFC Registration in India<\/a><\/strong> or are looking for advice regarding an NBFC Takeover, please contact Swarit advisors.<\/p>\n\n\n\n<p><strong>Also, Read:<\/strong> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/how-to-takeover-nbfc\/\">How to Takeover NBFC: A Complete Process<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>With the evolution of the new business model, the NBFCs or Non-Banking Financial Companies are also observing many changes in their activities, regulations, and management. The Reserve Bank of India or RBI is trying very hard to make the NBFC business smoother while recollecting compliance requirements. Worldwide mergers and takeovers are making its existence powerfully [&hellip;]<\/p>\n","protected":false},"author":6,"featured_media":2829,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[440,56],"tags":[441],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2828"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=2828"}],"version-history":[{"count":3,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2828\/revisions"}],"predecessor-version":[{"id":2833,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/2828\/revisions\/2833"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/2829"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=2828"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=2828"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=2828"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}