Shareholder IN nbfc

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sanjay (Querist)

01 April 2021 Hello All Experts and CA
Sir
I want to know on takeover of new NBFC can a director of old NBFC whose certificate has been cancelled be shareholder in other takeover company.
Pl guide if yes then how much % should be.
Regards

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

11 July 2024 In the context of a takeover of an NBFC (Non-Banking Financial Company) where the director of the old NBFC, whose certificate has been cancelled, wants to become a shareholder in the acquiring company (the new NBFC), there are specific regulatory considerations and guidelines to be aware of:

### Regulatory Considerations:

1. **Fit and Proper Criteria**:
- The Reserve Bank of India (RBI) has stringent "fit and proper" criteria for directors and shareholders of NBFCs. This criteria assesses the individual's integrity, financial soundness, and competence to run an NBFC.
- A director whose certificate has been cancelled from one NBFC needs to ensure compliance with these criteria before becoming a director or substantial shareholder in another NBFC.

2. **Shareholding Limitations**:
- The RBI has set out norms for shareholding in NBFCs, particularly for non-operating financial holding companies (NOFHC) and other types of NBFCs.
- Generally, for non-promoter shareholders, the RBI guidelines specify that no individual or group can hold more than 10% of the paid-up equity capital of an NBFC without obtaining prior approval from the RBI.

### Steps and Guidelines:

1. **Approval and Fit and Proper Test**:
- The individual in question should undergo the fit and proper test as per RBI guidelines.
- Any person who was a director or key management personnel in a financial services company that had its certificate of registration cancelled by the RBI would typically be scrutinized closely.

2. **Shareholding Percentage**:
- While there is no specific percentage mentioned in your query, the maximum limit for non-promoter shareholding is generally capped at 10%.
- If the individual wishes to hold more than 10%, they would need prior approval from the RBI.

3. **Application and Compliance**:
- The acquiring NBFC must ensure compliance with all RBI regulations regarding ownership and governance.
- Application for shareholding and directorship should include detailed information about the individual's past roles and any regulatory actions taken against them.

### Conclusion:

It is possible for a director of an old NBFC (where their certificate has been cancelled) to become a shareholder in a new NBFC through takeover, subject to compliance with RBI's fit and proper criteria and shareholding limits. The exact percentage would depend on these regulatory considerations and may require prior approval from the RBI if exceeding 10%. It's crucial to consult with legal and financial advisors who are well-versed in RBI regulations to navigate this process smoothly and ensure compliance.

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