Freezing of Folios of physical shareholders... Last date for KYC is 30th September 2023... Act now Ref: SEBI Circular SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2023/37

NBFC Management Transfer
  • Home
  • NBFC Management Transfer

What is NBFC Management Transfer?

It is very common for any Non-Banking Financial Company (NBFC) to transfer its management which becomes necessary because of different reasons on the face of a fast changing economic scenario. The NBFC Management Transfer happens when there is change on account of takeovers, retirement, resignation, or death. In other words, NBFC Management Transfer refers to any takeover or acquisition of control of an NBFC. However, NBFC Management Transfer needs to be done as per the guidelines of the Reserve Bank of India.

The Reserve Bank has made the norms for NBFC Management Transfer very stringent by making it mandatory to seek Prior Approval from it. The RBI has on 9 July 2015, issued the NBFC (Approval of Acquisition or Transfer of Control) Directions, 20152 (Amended Directions) indicating the situations in which a prior approval of the RBI would be required where there is a change in control or management of an NBFC.

Essential Requirements under NBFC Management Transfer

  • In the situation of any sale, transfer of ownership, or control, or any such change in management, a prior public notice of at least 30 days shall be given. Such notice shall be given by the concerned NBFC as well as the other party in the transaction or jointly by both the parties after getting the prior permission of the RBI.
  • The public notice shall be published in one leading English language newspaper and one leading local vernacular newspaper where the registered office of the company is situated. The notice must also contain the intention and reasons of such change in management or acquisition of the control.
  • There are different Annexure prescribed by the RBI in its notifications requiring information pertaining to the directors/promoters/shareholders of the NBFC. The NBFCs are required to provide the necessary information to the RBI for approval. If the information is found to be incorrect, the application shall not be entertained, and there will be a delay in approval.
  • All the applications for obtaining the NBFC Management Transfer/Prior Approval may be submitted to the Regional Office of the Department of Non-Banking Supervision in whose jurisdiction the Registered Office of the NBFC is located.

Conditions Under which NBFC Management Transfer/Prior Approval of RBI is necessary

Prior written permission of the Reserve Bank is a must for any NBFC Management Transfer. As per the RBI requirement for NBFC Management Transfer, there are some conditions in which promoters have to make a full–fledged application to RBI for their prior approval. The conditions in which the Prior Approval of the RBI is as below:

  • Condition #1: Any takeover or acquisition of control of NBFCs, whether or not resulting in the change in management of the company
  • Condition #2: Any change in the shareholding of an NBFC resulting in acquisition/transfer of shareholding of 26% or more of the paid-equity capital. In the same case when there is intra- group acquisition /transfer of shareholding of 26% or more of the paid-up equity capital in the NBFC then also prior RBI approval is required.
  • Condition #3: Any change in management of the NBFC which result in the change in more than 30% of the directors including change due to retirement by rotation require prior approval of RBI excluding independent director.

How does MUDS assist in NBFC Management Transfer?

Muds Management is a leading legal advisory firm in India having branches in Gurgaon, Delhi, and Mumbai. We provide a wide range of solutions for NBFC Management Transfer/Prior Approval from RBI. If you are looking for efficient services, do give us a call at +91 7011198909