NBFC Takeover- Avail 50% Off on Professional Fees

How NBFC Takeover works?

The NBFC Takeover revolves around two entities-

• 1. Target Company- An acquirer company is keeping its eyes on a 'to be acquired' company known as the Target Company.
• 2. Acquirer Company- A company that has got the ability to acquire the target company is renowned as Acquirer Company.

The target company is acquired by the acquirer company, and shares of the existing shareholders are transferred to the proposed shareholders or entity after following the due procedure. The acquiring company enjoys the pre-existing RBI registration of the target company along with its market standing.

Points to Consider before NBFC Takeover

Given below are the points one must consider before going for NBFC takeover-

• Due Diligence- Conduct extensive research and background checks before purchasing a business. A checklist of the aspects that need to be examined should be created. Make business goals and assess whether the target company is capable of achieving them.
• Examine the suitability- Before making an acquisition offer to any company, an acquirer must review the list of suitable candidates. During the process, a firm will identify candidates who are a good fit for their firm and meet the acquirer's primary goal.
• Evaluate the financial position- The financial standing of the firm you wish to buy must be properly assessed. Calculate the maximum amount payable for the takeover, as well as cash flows, and decide on the best financing method.

Types of NBFC Takeover

NBFC Takeover Can Be Of Two Types

1. Hostile Takeover

The name hostile takeover is itself indicating this term. A Hostile takeover is a type of takeover in which the acquirer or acquiring company uses different tactics to gain ownership of the target company without the nod of the board of directors associated with that target company.

During such kinds of takeovers, entities get involved in reaching out to shareholders by putting a tender offer on their table, and they even don't hesitate to indulge in a proxy fight to replace the management to get the acquisition accepted. For acquirers, the target company's board of directors' support and approval don't matter at all.

2. Friendly Takeover

A friendly takeover is a scenario that depicts the story of the acquisition of a target NBFC company by another company peacefully as this takeover is subject to the assistance and approval of the management and board of directors. The shareholders of the target company's say yes to the deal only if they feel that the price per share is better as compared to the current market price.

The benefits of the friendly takeover are not only limited to the better per-share price, but it's more and beyond that. The target companies get opportunities to fuel their business growth. Furthermore, they can explore different spheres of the market as well. In brief, a friendly takeover is all about mutual consent.

Benefits of NBFC Takeover

Given below are the benefits of the NBFC Takeover-

• Positive growth in the sales and revenue
• Expand its regional presence and access new customer groups
• Portfolio diversification for improvement in financial performance stability
• The acquiring company can boost its market control
• The acquiring company can improve operational efficiency
• Saves time in comparison to the new NBFC registration

Cases in Which RBI Approval for NBFC Takeover is Required

RBI approval for NBFC takeover is required in the following cases;

As the governance and control of NBFC lie in the hands of RBI, its consent matters the most and is necessary to get the approval in these cases mentioned below.

• At the onset of Takeover of NBFC procedure, approval becomes mandatory.
• In those circumstances, management changes, leading to a change of 30% of the total number of directors.
• When the shareholding pattern witnesses a change by becoming responsible for the transfer of 26% or more of the paid-up capital of the corporation to others.

Exception to the RBI Approval Requirement for NBFC Takeover

• RBI has nothing to do with the decline in capital or buyback of the shares, as a competent court exists to deal with them.
• Change in management in case of rotation of board members inclusive of independent directors.

Eligibility Criteria for NBFC Takeover

Given below is the eligibility criteria for NBFC takeover in India-

Number of Parties

The NBFC takeover process encompasses two types of NBFC companies registered in India. The parties involved in the NBFC takeover process are-

1. Acquirer Company

An Acquirer company is a form of company that is known for acquiring the target company. The Reserve Bank of India authorizes the acquirer company and an individual to acquire or transfer the shares of the existing shareholders of the target company.

2. Target Company

A Target Company is the form of company that is being targeted to be acquired by another company. It must be registered under the Companies Act of 2013. Besides this, it should have a valid NBFC COR.

• NBFC Asset Classification Under the Asset Liability Management System, the NBFCs should secure their asset classification.
• Capital Required for NBFC Takeover The acquiring NBFC should have a minimum NOF of Rs 2 Crores. Besides this, the buyer must be ready with Rs 5 Crores to meet the requirement of scale-based regulation issued by the Reserve Bank of India.
• Positive Net Owned Funds The target NBFC must maintain positive net owned funds.
• Fit and Proper Criteria The acquiring NBFC should meet the Fit and Proper Criteria.
• Operational Viability The acquiring NBFC must ensure that the operational viability of the target NBFC is uncompromised after NBFC Takeover.

Public Notice for NBFC Change while NBFC Takeover

In case there is a change in control or management, a public notice shall be issued in one leading national newspaper and one local newspaper. The public notice must be provided at least 30 days before such sale of shares or transfer of control, either with or even without share transfer. Have a look at the indications of public notice:

• Intention to sell or transfer ownership or control
• Reasons for sale or transfer of ownership or control
• Particulars of the transferee

How to Apply for NBFC Takeover Process?

In order to apply for NBFC takeover, you need to understand the process of takeover. Given below is the stepwise procedure for NBFC takeover in India-

1. Memorandum of Understanding

The procedure for Non-Banking Financial Company Takeover triggers off from the Memorandum of Understanding (MOU) to get signed with the proposed company.

It defines that both of the companies are ready to move into a takeover agreement. The Director of the acquirer company and the target company come on board and sign the MOU.

Memorandum of Understanding touches upon the needs and responsibilities of all the companies. At the time when MOU gets approved, the acquirer company pays the token money to the target company.

2. Prior Approval Requirement of RBI is the Most Crucial Step if required

If there is any requirement, getting prior approval of RBI is the one of the most significant steps in NBFC takeover.

3. Publish the Public Notice Bilingually

The public notice should be published in two regional languages. The first language should be English, and the second, in a regional language, should be released within 30 days of receiving RBI clearance.

4. Set Foot in the Formal Agreement

From here on, two concerned parties can think of entering into a formal agreement, and they can now purchase share/transfer of administration/transfer of shares/ or before-mentioned concerns for takeover.

5. Publish the Second Public Notice

The requirement is to publish the second public notice in two different regional languages. English should get weightage as the first language while get published the other one in regional language. Before moving into an agreement, public notice should be posted before 30 days for the purchase of share/transfer of authority/transfer of shares or before-divulged concerns for takeover.

6. Public Notice Engirdle the Following Significant Things

• Intention to transfer or sell direction/ownership;
• To the point particulars of the transferee; and
• The purpose behind the act of sale or transfer of authority/ownership

7. Commencement of the Liquidation process

• This step talks about the liquidation of all the assets of the target company. Moreover, all the liabilities would be apt to be paid off.
• The acquirer will get to see a fair balance in the bank in the company's name. Calculation on this part considers net worth as the basis as it was on the takeover day.

8. Obtain NOC from Creditors End

Before the transfer of business takes place, Target Company Shall acquire NOC from the creditors.

9. Assets Transfer

Once the scheme gets approved by the Reserve Bank of India without any kind of objections, the transfer of assets shall take place.

10. Entity Valuation in Agreement to the RBI prescribed rules

As RBI has provided a set of rules and regulations, the valuation of the entity can be made possible following them. The discounted cash flow (DCF) method is the technique that supports the valuation process. It's a method that is known for portraying the net present value of any entity.

Timeline for Takeover of NBFC

The takeover of NBFC takes around 5 to 6 months in the normal course of business. There is a possibility of extension in timeline due to regulatory delays.

We recommend you consult Corpbiz experts for the stress-free takeover of NBFC and leave no room for regulatory delay.

Why Opt for Corpbiz for NBFC Takeover in India?

The process of NBFC takeover can be complex and time-consuming. Our experts understand the pain points in the journey of an NBFC takeover; thus, they know how to streamline the journey for those looking for an NBFC takeover in India. Let’s have a look at how Corpbiz can turn out to be the most reliable partner for NBFC Takeover in India-

• Network of 10,000+ Professionals Well-versed in Regulatory Frameworks
• 10+ years of Solid Experience in Handling NBFC Takeover Cases
• Cost-effective Solutions without Compromising on the Quality
• Conduct thorough Financial, Operational, and Legal Due Diligence for NBFC Takeover
• Expert Assessment of Assets, Liabilities, and Compliance Status of Target NBFC
• Provide Accurate Valuation of the Target NBFC
• Draft and Review all the Necessary Legal Documents
• Strategic Advice on Structuring the NBFC Takeover Deal
• Regulatory Compliance Management Support for NBFC Takeover
• Provide Assistance in the Post-takeover Integration
• Financial advisory services, including capital restructuring, financial planning, etc