Takeover

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NBFC INTRODUCTION
Non-Banking Financial Company (NBFC) is a company
registered under the Companies Act, 1956 /2013 engaged in
the business of loans and advances, Assets financing ,
investment share, debenture or other marketable securities of a
like nature, leasing, hire-purchase and insurance business

NBFC provides working capital loan and credit facilities and

investment in properties. It is useful for trading money market
instruments
TAKEOVER MEANS :

A takeover is the purchase of one company (the target)

by another (the acquirer ) . Takeovers can create a
bigger, more competitive, more cost-efficient entities.
PROCEDURE for NBFC Merger
The First Step towards takeover of NBFC is to sign the MOU with proposed
company, the proposal of NBFC takeover should be approved by the board of
directors
seek consent of the bank/FI concerned for the proposed takeover/ sale
Prepare KYC Documents
Business Plan and Projection
Seek RBI Approval
Issue Public notice after RBI Approval
File an Application to national Company law Tribunal under Section 391-394 of
the Companies Act, 1956 or Section 230-233 of Companies Act, 2013 seeking
order for mergers or amalgamations with other companies or NBFCs
CONT.

Acquirer of NBFC can first through the documents of target

company , once Acquirer confirms the Acquisition of the
said NBFC, MOU to be signed with some token money.

MOU It is a non binding agreement between two or more

parties outlining the terms & details of an understanding ,
including each parties requirements & responsibilities .

The business deal ended with a discussion of the

memorandum of understanding as to ensure all the parties
were on the same page.
 Cont..

Convene Board meeting after giving notice to all the directors to

discuss besides others the following matters.
To propose resolutions to be passed at the Extraordinary General
Meeting of shareholders
To fix the date, time and place for convening the Extraordinary
General Meeting of shareholders.
Coordinating with and replying to all RBI queries raised for the
purpose of takeover scheme.
All the documents be submitted to the RBI where the company
registered office is situated .
 Cont..

After getting RBI approval letter , issue public notice . ( in last

side we see ) in the two newspapers within 30 days as per the
RBI regulations indicating such change in management and
inviting public objections if any.
Signing Share purchase Agreement & handing over change of
management payment of remaining considerations etc to be
carried out after 31st day of newspaper notice or as mutually
agreed by all the parties.

A public notice of at least 30 days shall be given before

effecting the sale or transfer of ownership by sale of shares .
 Cont..

All rights, titles, interests and benefits in the assets have

been transferred to the buyer
The transfer of assets from selling NBFC must not
contravene the terms and conditions of any underlying
agreement governing the assets and all necessary
consents from obligors (including from third parties, where
necessary) should have been obtained.
NOC from creditors is required .
Valuation according to RBI

Valuation of NBFC Takeover is to be done according to DCF method ( Discounted Cash Flow Method
) The discounted cash flow (DCF) analysis represents the net present value (NPV) of projected cash
flows available to all providers of capital, net of the cash needed to be invested for generating the
projected growth.

A DCF analysis yields the overall value of a business (i.e. enterprise value), including both debt and
equity.
CA CERTIFICATE AFTER VALUTION

After the valuation Chartered Accountant will provide a

certificate.
Certificate includes
1. purpose of valuation ,
2. brief background of company,
3. sources of information
4. Exclusions & Limitations
5. Valuation Approach
NBFCs shall submit an application, in the company letter head, for
obtaining prior approval of the Bank along with the following
documents

All Personal documents of directors & shareholders is required like

Income proof etc.

Declaration of all the directors is required that there is no criminal

case & NBFC not associated with any company .

Sources of funds of the proposed shareholders acquiring the shares

in the NBFC;

Financial statement for last 3 years is required .

Bankers Report on the proposed directors/ shareholders.

Change in management according to RBI
For an organization, change management means defining and implementing procedures
and/or technologies to deal with changes in the business environment and to profit from
changing opportunities.

Any change in the shareholding of an NBFC, including progressive increases over time,
which would result in acquisition/ transfer of shareholding of 26 per cent or more of the
paid up equity capital of the NBFC.

Any change in the management of the NBFC which would result in change in more than
30 per cent of the directors, excluding independent directors. Prior approval would not be
required for those directors who get re-elected on retirement by rotation.
PUBLIC NOTICE

Public notices are announcements from all levels and branches of

government, from businesses and from individuals. Newspapers
publish thousands of public notices every day, often in their
classified advertising sections. Public notices inform you about
government actions, environmental conditions and economic
changes

A notice providing information for the public that is widespread

throughout all types of media. It will be in newspapers, on radio
broadcasts and television broadcasts. It includes items such as
Lottery results and Development applications.
Public Notice about change in control/ management

A public notice of at least 30 days shall be given before

effecting the sale of, or transfer of the ownership by sale of
shares, or transfer of control, whether with or without sale of
shares. Such public notice shall be given by the NBFCs and
also by the other party or jointly by the parties concerned,
after obtaining the prior permission of the Reserve Bank.

The public notice shall indicate the intention to sell or

transfer ownership/ control, the particulars of transferee and
the reasons for such sale or transfer of ownership/ control. The
notice shall be published in at least one leading national and
in one leading local (covering the place of registered office)
vernacular newspaper.
Thank You

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