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NBFC Sale in India: In and out Strategy of NBFC Business in India

NBFC Sale in Inda - In and out Strategy of NBFC Business in India - Corpseed.jpg

Introduction: Finance Business


The finance business, especially lending is very attractive segment since ancient times. Almost all of us have witnessed the lending transaction in our homes, society, town and across the country, either organized or unorganized. Short-term or long-term, secured or unsecured, personal or professional whatever may be the case, people do need funds to run and it is been now an integral part of human life. Finance is been a prime source of every aspects of human and business life. Corporations do need funds and obviously approach financial institutions like banks, Corporations, Non-Banking Financial Companies or else. However even Individuals unlike earlier now a day approach at least Non-banking financial companies against the money lenders available in town, due to the effect of rate of interest.

Due to the all-time high demand of finance in the market from both the perspective either personal or commercial, the need of such an organization and its business potential is high. Though the market has the good tune of players list, but still we can observe that many people and corporations are dying for fund i.e. accessible funds with effective rates of interest, collateral-free and less stringent processes to get it. As the entire Banking and financial system of India is often been criticized due to the lengthy processes and validation of collateral and so on. On top of it, obviously, the rate of interest and processing fees are thereon.

On the crux, the market has always welcomed the new player and often the existing player leaves the market by any of reason. Generally new player has to go through very stringent and lengthy process of licensing as it is a matter of the country’s financial eco-system. And in the other hand license holder willing to leave the market due to the rapid technological growth, product variation and actual exit on good returns of the same. Therefore, as a financial ecosystem “In and out” is a generic process. No worries, in either of case the segment does run and live the market tantrum accordingly.

In this article, we will be focusing on exit from existing businesses instead of fresh registration and license procedure. However, the fresh license and its process can be accessed from NBFC Registration

Market Presence:

While discussing on finance business and more precisely on Non-banking finance companies, around 12k registered and licensed Non-Banking Finance Companies (NBFC) across its category in the market as per Reserve Bank of India (RBI), published data. Out of registered NBFCs, so many are in the market and are in the process to exit from it. Existing NBFC can get out of it from three ways i.e.

  • Surrender of its license to RBI
  • Cancellation of license by RBI due to non-compliance of RBI regulation
  • Transfer of Control or Sale of business

Well, first one is the choice of owner instead of the sale of his/her business the Board decides to go to RBI and apply for surrender of license. Which can be completed only if the applying entity does not have any financial business or the principal business criteria is not met by the entity.

On the other hand, the licensed entity is required to maintain and submit the data as prescribed in its guiding law on a given interval. Fail to do so and severe issues on compliance of the prescribed set of regulatory mandates to NBFC, the RBI can cancel its license after giving the opportunity of being heard. While cancelling the license the order will be a speaking order and need to be complied by NBFC on priority.

Both options is not so wise to the existing owner of NBFCs as far as commercial is concerned, so the third one might be a breakthrough for existing NBFCs to avail the benefits of commercial while leaving the institution. And it’s fair trade practice. In fact, the company is also an asset and the provision of prescribed law has given fair process of buy and sale of any business/company across India.

Discussing the actual One:

Talking about the 3rd option i.e. Transfer of Control or Sale of Business points to consider and get the same complied are listed below. It can be majorly discussed into two aspects, i.e. Reserve Bank of India and Ministry of Corporate Affairs (MCA).

Transfer of Control to transact the sale of a business is tested by Change in the Board of Directors and Transfer of Shares from an existing to a new one. And for this, the RBI has issued guidelines in 9th July, 2015. Kindly note we are discussing the sale of business or transfer of control not change in the object, name change or changes of registered address of the business, as all this kind of requirement is often ancillary with the assignment of change in control or sale of the business.

As the NBFC is RBI regulated again the replacing Board of Directors should possess the skillset, experience and academic qualification required for doing finance business. The logic is to satisfy the department itself the replacing board has a more promising team to excel the running business into new heights. Similarly, the person who are buying the shares should have clean money and proper records of transactions with other commercial law of the country. These two aspects have a major role on the success of the transfer of control or sale of the business.

Decoding the RBI Process:

Both seller and acquirer jointly need to put an application to the Regional Reserve Bank of India, where the NBFC is incorporated. As the process will be led by NBFC regarding the application, follow up and other stuff are only possible by NBFC as it is required to coordinate with regional RBI.

Documents Checklist:

Applicant NBFC should conduct a board meeting and resolve the transaction with the approval of its shareholders either in the Annual General Meeting or Extra Ordinary General Meeting, to get this transaction done. The board should issue the appointment resolution and power of attorney if other than the Board of Directors represents the case in front of regional RBI on behalf of NBFC.

The application should consist following documents with its for RBI application to get prior approval for sale of business or transfer of control.

  • Information about proposed directors/shareholders as per the given format
  • Acquiring shareholder's sources of funds
  • Declaration by the proposed directors/shareholders that they are not associated with any unincorporated body that is accepting deposits, earlier if applied then the application has been not rejected by RBI and no criminal offence, including offence under section 138 of the Negotiable Instrument Act, against them
  • Banker’s report on the proposed directors/shareholders

Once regional RBI review the submitted application, will issue further query if any on the application otherwise will approve the application. Then 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 the sale of shares.

Decoding the Ministry of Corporate Affairs:

Once RBI approval receipt, then based on the same appointment of director resolution will be passed and duly appointed with a due process of share transfer from existing to new shareholders. Required forms are filed to the Ministry of Corporate Affairs to update the Master Data of the company. Accordingly, the register and other documents are prepared and put it into records.

Before RBI and MCA Process:

As you have been a buyer, buying something which you may know at all or may not be. Accordingly, being a seller in this process, again you need to know to whom you are selling your entity. In fact, it is the process of knowing each other without impacting the entire process. There you need to have one experience consultant to ease out the process, as the transaction involves various compliance from day one to the endpoint. There we stand to serve you. Accordingly, we facilitate the interested people to match their requirements and also give them an ease of stringent process with no more headache for the entire process. As the involvement is many, the time taken by RBI to phase out the application is also very good time, beyond 6 months or more. Till date, regular follow-up and update is most to serve their questionnaire on time and submission of documents.

The Process to Application and Churn out the Deal:

Initially either buyer or seller, with us has their own unique requirement. According the basic requirement are finalized then,

The seller will onboard with us on our agreed terms and accordingly buyer also onboard with us on agreed terms and conditions.

Then due diligence is done for both parties. Once found good to go then the Term sheet will be signed mentioning the process and timeline for each act thereon with the release of payment. 

Generally, the buyer needs to release 10-15% of the deal price as token money for the process, the day prior to approval is received from RBI and rest considerations are transferred and the sale of shares are executed after 30 days of public notice jointly.

In this way, the transfer of control or sale of a business is completed.


Concluding the article, it is noteworthy that the simple is not easy and obviously involves a good tune of complexities as far as finalizing the share transfer value, genuine premium value, tax burden and all. The entire gamut needs to take care of, accordingly with experience hand else the same can be ended with the great mess for both buyers and sellers. Therefore, for any need of assistance undoubtedly get in to touch with Corpseed.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not corpseed, and have not been evaluated by corpseed for accuracy, completeness, or changes in the law.


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