It may be mentioned, the Indian Central Bank/financial sector regulator, viz., the Reserve Bank of India (the "RBI"), vide its Notification No. DNBR.(PD) 029/CGM(CDS)-2015 issued on July 09, 2015, has repealed the Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014 and replaced the same with the Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2015 ("NBFC Directions 2015"), making it mandatory, w.e.f. 9 July 2015, for all Non-Banking Finance Companies ("NBFC" or "NBFCs") to obtain its prior written permission/approval, in respect of the following matters:
- any takeover or acquisition of control of an NBFC, which may or may not result in change of management;
- 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. Prior approval would, however, not be required in case of any shareholding going beyond 26% due to buyback of shares/ reduction in capital where it has approval of a competent Court. The same is, however, required to be reported to the RBI not later than one month from its occurrence; and
- 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.
It may be added, the concerned NBFC would have to first make an application along with relevant supporting/prescribed documents as provided in Para 4 of the NBFC Directions 2015, to the RBI's Regional Office- Department of Non-Banking Supervision having jurisdiction over its registered office. It may be further added, prior to effecting the transfer and post the RBI approval, in terms of Para 5 of the NBFC Directions 2015, such NBFC and the transferee, jointly or separately, would also have to give a 30 days public notice.
Primary dealers have been excluded from the scope of the NBFC Directions 2015, however, non-deposit accepting NBFCs have been included therein.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.