Following a notification on 26 May, it is now mandatory for companies to obtain prior approval from the Reserve Bank of India (RBI) for any acquisition or transfer of control in any non-banking financial company (NBFC), whether deposit-accepting or non-deposit accepting. Earlier, this approval was required only for deposit-accepting NBFCs.
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Prior written permission from the RBI is required for:
- A takeover or acquisition of control of an NBFC, whether by acquisition of shares or otherwise;
- Any merger or amalgamation of an NBFC with another entity or any merger or amalgamation of an entity with an NBFC that would give the acquirer or another entity control of the NBFC;
- Any merger or amalgamation of an NBFC with another entity, or any merger or amalgamation of an entity with an NBFC which would result in the acquisition or transfer of shareholding exceeding 10% of the paid-up capital of the NBFC.
Prior written approval of the RBI would also be required before approaching a court or tribunal for a scheme of arrangement under the Companies Act, 1956, or the Companies Act, 2013, as applicable, seeking an order for merger or amalgamation with other companies or NBFCs.
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The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bangalore, Singapore, Silicon Valley and Munich. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.
