NBFC Merger Process in India

NBFC MERGER Presentation by Enterslice on Process of NBFC Merger

Introduction

Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 /2013 engaged inChallenge the business of Challenge 2 3 loans and advances, Assets financing , investment share, debenture or other marketable securities of a like nature, leasing, hire-purchase and insurance business.

NBFC provides working capital loan and credit facilities and investment in properties. It is useful for trading money market instruments

Key points about Merger ●

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A Merger is a deal to unite or combine two existing companies into one new company.

A merger is a corporate strategy of combining two or more different NBFC companies into a single company in order to enhance the financial and operational strengths of both organizations.

Acquiring company is a single existing company that purchases the majority of equity shares of one or more companies.

Acquired companies are those companies that surrender the majority of their equity shares to an acquiring company.

Merger

Example In this below chart - Company 'A' will purchase the majority of equity shares (ownership shares) of Company 'B'. Company 'A' will take over the assets and Challenge 2 Challenge 3 liabilities of the Company 'B'. The shareholders of the Company 'B' will be given the shares of Company 'A'.

Company A

Company B

Acquiring Company

Acquired Company

Company A (After Merger)

Retains the Name of Acquiring Company

Advantages

1. Economies of scale – Increase loan size of the NBFC, can reduce the admin cost as wellChallenge 2 Challenge 3 2. Mergers of NBFC can help then to grow and compete with Govt. & MNC Banks and later can to move forward for a Bank License.

3. Merger of NBFC Allows the acquirer to avoid many of the costly and time- consuming aspects of asset purchases, software development, such as the assignment of leases and bulk-sales notifications.

4. Accomplished tax-free for both parties.

5. Merger of NBFC can help to compete with the Banks 6. Increase in Market share 7. Increase Goodwill & Reduce NPA

Disadvantages

1. Large scale of NBFC Business may create challenges in operation Challenge 2 Challenge 3 management 2. It creates distress within the employee base of each organization.

3. It may increase the amount of NPA & operating Risk 4. Management issues 5. Managers need to decide who will be in charge after they join forces.

Procedure

Sign the MOU and get approval from Board of Directors

Step 1

Seek RBI Approval for proposed Merger of NBFCs

Prepare KYC Documents of Directors & Companies

Step 2

Seek Consent from Bank concerned for the proposed merger/ amalgamation

Step 3

Step 4

Business Plan and Projection

Step 5

Issue Public notice after RBI Approval

Step Step 16

Final Step

File an Application to national Company law Tribunal under Section 391-394 of the Companies Act, 1956 or Section 230-233 of Companies Act, 2013 seeking order for mergers or amalgamations with other companies or NBFCs

NCLT Application (Final Step)

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An application shall be made to the respective high court to convene a general meeting of the shareholder The court has no power to dispense with the holding of meeting even though the shareholders might have unanimously approved the scheme.

Company will conduct Shareholder meeting for the approval of the merger scheme of the company

Documents Required 1.

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A certified true copy of the latest audited B/S and P&L A/c of transferee company Challenge 2 Challenge 3 List of shareholders In case of Listed NBFC Companies, obtain SEBI’s prior permission Prepare the Scheme of Amalgamation and Explanatory Statement.

An application can also be made by the transferee of shares.

List of creditors with their Outstanding Balance Obtain the Official Liquidator’s Report Intimation to regional director of MCA Valuation report of the company Details of the legal proceeding by or against company, contract summary Document Checklist for NBFC Merger.

NCLT Checklist before Approval

NCLT Checklist before Approval 1.

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Cross questioning on on material facts including latest financial position, 2 Challenge 3 auditors report and otherChallenge information.

Members or creditors or any class of them are fairly represented by those who attended the meeting.

There is no oblique motive of the scheme Scheme is based on commercial consideration, workable, feasible, financially viable and in public interest Scheme is in interest of company, members or creditors Majority is acting reasonably, prudently and real

Have plans to Merge your Companies?

Enterslice has helped entrepreneurs like you merge their NBFCs

Our Process Process

Analysis of your requirements We will study the case, perform a thorough analysis of Merging Companies

Analysis

Execution

We Execute We prepare all the documentation, guide you through the process, help you in complying with RBI Guidelines and complete Merger.

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