Loan Company Registration
Loan Company is a type of financial institution carrying its principal business of providing
finance in the form of loans or advances. They obtain funds by taking deposits from the
public and give loans to small-scale traders. Generally, these type of companies obtain
funds in the form of public deposits and give loans to wholesale and retail traders,
small-scale industries and self-employed persons. By offering higher rates of interest, they
collect fixed deposits from the public and give loans to others at relatively higher rates
of interest.
Now come to the takeover process of Loan Company, here are the following takeover
requirements:
Takeover process requires prior approval of the Reserve Bank of India whereas minor changes
in the management or control are outside the purview of the approval but in case of
significant changes, prior approval of RBI is required to be obtained.
In the following circumstances, prior approval of Reserve Bank of India is required:
- The Takeover of NBFC or acquisition of control, which may or may
not results in the change in management.
- Variation in the shareholding of an NBFC, which is resulting in 26% acquisition or
transfer of the paid-up capital including progressive increases over the period of
time.
- Change in the management by way of change in more than 30% of the directors of the
NBFC.
- Prior approval of RBI will be required in case of acquisition or transfer of
shareholding for more than 10%.
- In case there is a change in shareholding for more than 26% for the reason of
buyback/reduction in share capital but this reduction/buyback should have been
approved by the competent authority, no RBI approval will be required.
- No RBI approval will be required in case of a change in the management by 30 %
inclusive of Independent Directors or by rotation of the directors in Board.
- Change in direction of the company requires a prior public notice at least 30 days
prior to the announcement of such change.
Application for Prior Approval of RBI
The next step is to make an application to the RBI for the approval on the letterhead
of the company along with the following required documents:
- Information of Proposed directors and shareholders.
- Information regarding sources of funds required for acquiring shares in the NBFC by
the proposed shareholders.
- Declaration by all the proposed directors and shareholders stating their
non-association with any entity accepting deposits.
- Declaration by all the proposed directors and shareholders stating their
non-association with any entity to whom Certificate of Registration is denied by the
RBI.
- Statement regarding non-criminal background as well as non-conviction under section
138 of the Negotiable Instruments Act by all the proposed directors as well as
shareholders.
- Bankers’ Report with regard to proposed directors and shareholders.
An application shall be submitted to the Regional Office of the Department of Non-Banking
Supervision in whose control the Registered Office of the NBFC is located. All the queries
raised by the RBI shall be timely answered in respect of the takeover so as to avoid any
unforeseen delay in the approval. Usually, an application for NBFC takeover goes through a
processing time of three to four months in the normal course of business.
