NBFC Core Investing Company Registration

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NBFC Core Investing Company Registration

A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 ( or any earlier enactments) engaged in the business of loans and advances, acquisition of shares/ stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/purchase/ construction of immovable property. NBFCs are different from banks. NBFCs are categorized on the basis of liabilities (Deposit and Non-Deposit accepting NBFCs), size (Systematically Important and other non-deposit holding companies (NBFC-NDSI and NBFC-ND), and by the kind of activity they conduct. With this broad categorization, the different types of NBFCs are as follows:

  • Asset Finance Company
  • Investment Company
  • Loan Company
  • Infrastructure Finance Company
  • Systematically Important Core Investment Company
  • Infrastructure Debt Fund
  • Micro-Finance Institution
  • NBFC Factors
  • Mortgage Guarantee Companies
  • Non-Operative Financial Holding Company

Definition Of Core Investment Company:

“Core Investment Company” means Non-Banking Financial Company categorized by RBI which is mainly engaged in investment of shares of its own group companies for holding purposes however they cannot trade in such instruments or carry out any kind of financial activity. Systemically Important Core Investment Company means an NBFC carrying on the business of acquisition of shares and securities which satisfies the following conditions: -

  • it holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, debt or loans in group companies;
  • its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its Total Assets;
  • it does not trade in its investments in shares, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;
  • it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies.
  • Its asset size is 100 crore or above and
  • It accepts public funds

* Scale Based Regulation(Sbr); A Revised Regulatory Framework For Nbfcs:

To tighten strict control over NBFCs, RBI has prescribed Guidelines on Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs on 22nd October 2021 which will be effective from 01st October,2022. NBFCs shall be categorized into Four Layer Approach i.e Base Layer, Middle Layer, Upper Layer and Top Layer. Core Investment Companies shall be covered under the “Middle Layer” Category.

Documents For NBFC Core Investing Company Registration

Requirements to be complied with and documents to be submitted to RBI by Companies for obtaining certificate and Registration from RBI as Core Investment Company (CIC):

Sr. No.

   DOCUMENTS

1

Details of access to Public Funds.

2.

If the company does not have public funds but intends to access public funds anytime in the future and therefore applying for the CoR, they have to submit the Board Resolution to the effect that they intend to raise resources through public funds at a future date.

3

Application to be submitted in two separate sets tied up properly in two separate files and properly page numbered.

4

Identification particulars (Annex I).

5

Statement on prudential norms (Annex II).

6

Information about the management (Annex III)

7

Details of change in the management of the company during last financial year till date if any and reasons thereof.

8

Certified copies of Certificate of Incorporation and Certificate of Commencement of Business in case of public limited companies.

9

Certified copies of up-to-date Memorandum and Articles of Association of the company.

10

Details of clauses in the memorandum relating to financial business.

11

Details of changes in the Memorandum and Articles of Association duly certified.

12

Copy of PAN/CIN allotted to the company.

13

Annex II to be submitted duly signed by the director/Authorized signatory and certified by the statutory auditors.

14

Annex III (directors’ profile) to be separately filled up and signed by each director. Care should be taken to give details of bankers in respect of firms/companies/entities in which directors have substantial interest.

15

In case the directors are associated with or without substantial interest (indicate %of holding in each company firm) in other companies, indicate clearly the activity of the companies and details of their regulators if any.

16

Certificate from the respective NBFC/s where the Directors have gained NBFC experience.

17

Copy of PAN and DIN allotted to the Directors.

18

CIBIL Data pertaining to Directors of the company

19

Financial Statements of the last 2 years of Unincorporated Bodies, if any, in the group where the directors may be holding directorship with/without substantial interest

20

Certificate of compliance with section 45S of Chapter IIIC of the RBI Act, 1934 regarding unincorporated bodies with which director/s of the company are associated.

21

Whether any prohibitory order was issued in the past to the company or any other NBFC/RNBC with which the directors/promoters etc. were associated? If yes, details thereof.

22

Whether the company or any of its directors was/is involved in any criminal case, including under section 138(1) of the Negotiable Instruments Act? If yes, details thereof.

23

Board Resolution specifically approving the submission of the application and its contents and authorising signatory.

24

Board Resolution to the effect that the company has not accepted/solicited any public deposit and will not accept the same in future without the prior approval of Reserve Bank of India in writing.

25

Board resolution stating that the company was not trading/ will not trade in its investments in shares, bonds, debentures, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment.

26

Board resolution stating that the company does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the Reserve Bank of India Act, 1934 except

investment in

i)  bank deposits,

ii) money market instruments, including money market mutual funds

iii)  government securities, and

iv)  bonds or debentures issued by group companies,

v) granting of loans to group companies, and

vi) issuing of guarantees on behalf of group companies. 

27

Certified copy of Board resolution for formulation of “Fair Practices Code”

28

Statutory Auditors Certificate certifying that the company is/does not accept/is not holding Public Deposit.

29

Statutory Auditors Certificate certifying that the company had not traded, during the year in its investments in shares, bonds, debentures, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment.

30

Statutory Auditors Certificate certifying that the company does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the Reserve Bank of India Act, 1934 except

investment in

i)  bank deposits,

ii) money market instruments, including money market mutual funds

iii)  government securities, and

iv)  bonds or debentures issued by group companies,

v) granting of loans to group companies, and

vi) issuing of guarantees on behalf of group companies. 

31

Statutory Auditors Certificate certifying Average Market Price of quoted investments.

32

Statutory Auditors Certificate certifying the net asset size of the company.

33

Statutory Auditors Certificate certifying investment in group companies as percent of its Net Assets.

34

Statutory Auditors Certificate certifying investments in equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies as percent of its net assets

35

Details of Authorised Share Capital and latest shareholding pattern of the company including the percentages. Documentary evidence for change in shareholding pattern, if undergone. If there are any NBFC corporate shareholders, certificates from their statutory auditors regarding the adequacy of statutory NOF post investment. Also, provide details about the line of activity of other corporate stake holders.

36

Details of infusion of capital if any during last financial year together with the copy of return of allotment filed with Registrar of Companies.

37

Details of the bank balances/bank accounts/complete postal address of the branch/bank, loan/credit facilities etc. availed.

38

Details of unsecured loans if any, raised by the company from others (including the directors) during the year and if these fall in the exempted category of Public deposits certified by the Auditor.

39

A certificate of Chartered Accountant regarding details of group/associate/subsidiary/holding/related companies is to be submitted.

(For the purposes of determining whether a company is a CIC/CIC-ND-SI, 'companies in the group" have been exhaustively defined in para 3(1) b of Notification No. DNBS.(PD) 219/CGM (US)-2011 dated January 05, 2011 as an arrangement involving two or more entities related to each other through any of the following relationships, viz; subsidiary-parent (defined in terms of AS-21), Joint Venture (defined in terms of  AS 27), Associate (defined in terms of AS 23), promoter-promotee (as provided in the SEBI-Acquisition of shares and takeover) Regulations, 1997) for listed companies, a related party (defined in terms of AS 18) Common brand name, and investment in equity shares of 20% and above.)

Details should include names of the company, its activity, whether it is an NBFC or have other regulators like SEBI/IRDA/FMC/NHB/Foreign Regulators. If they are unregulated give the details of their activities, principal banker’s name, address, account no. Whether the names of these companies are appearing in the balance sheet of the applicant company. If not, indicate why they are not appearing. Whether overseas group companies were established under general permission route or under approval from appropriate authority if any. If there are other NBFCs in the group, justification of having another NBFC.

40

Details of other CICs in the group. If they are not registered with the Bank, reasons for the same may be given. Justification of having another CIC in the group also should be provided.

41

Brief background note on the activities of the company during the last three years.

42

Last three years Audited balance sheet and Profit & Loss account along with directors & auditors report or for such shorter period as are available (for companies already in existence).

43

Business plan of the company for the next three years giving details of its (a) thrust of business; (b) market segment; and (c) projected balance sheets, Cash flow statement, asset/income pattern statement.

44

Source of the startup capital of the company substantiated with documentary evidence. (only for the new companies).

45

Details of mergers and acquisition with/of other companies if any together with supporting documents.

46

Is the company engaged in any capital market activity? If so, whether there has been any non-compliance with SEBI Regulations? (Statement to be certified by Auditors).

47

Whether the company was granted any permission by FED to function as Full-fledged Money Changers? If so, copy of the RBI letter granting the permission.

48

If there is FDI in the company, its percentage (submit FIRC in support thereof) and whether it fulfills the minimum capitalization norms or not (also submit FC_GPRs).

(i) Has the FDI been brought in with FIPB approval (Copy of approval to be submitted)?

 (ii) Is the foreign entity contributing the FDI subject to supervision in its home country (if yes, name, address and email id of the regulator).

(iii) If not, mention legal status, viz, statutes under which it was established, its statutory obligations, procedures under which it was established, whether listed on stock exchange etc.

(iv) The particulars of approval of Foreign Exchange Department (FED) if any obtained/copies of Foreign Inward Remittance Certificate in r/o Foreign Direct Investment if any, received by the applicant company are furnished.

(v) Activities undertaken, details of regulator of group/associate companies doing financial activities which are regulated either in the home country or elsewhere, if any.

 

(v) If any group/ associate company is operating in India, details such as its activities, its partners or associates, regulator/s etc. may be furnished.

49

Declaration by the company to own electronic infrastructure and its capability regarding electronic submission of data through the internet as and when required by Reserve Bank of India. Email id of the company should also be provided.

50

A company which is already in existence and whose  (i) minimum Capital Ratio  in terms of Adjusted Net Worth is less than 30% of its aggregate risk weighted assets on Balance Sheet and risk adjusted value of off-balance sheet items as on the date of the last audited Balance Sheet, and/or (iii) a Leverage Ratio where its outside liabilities are  exceeding 2.5 times its Adjusted Net Worth as on the date of the last audited Balance Sheet, as on the date of application, may also furnish a time-bound programme as to how it proposes to adhere to these requirements.

51

A company which proposes to become a CIC-ND-SI but does not qualify in terms of 90% of net assets under investments may also give a time bound action plan as to how it would achieve such eligibility.

52

Are there are any incidents of non-compliance with the directions of Revenue Authorities or any other statutory authority by the applicant company, its holding company/ subsidiaries, if yes, give particulars, else report "Nil"

Features Of NBFC Core Investing Company Registration

  • It holds not less than 90% of its Total Assets in the form of investment in equity shares, preference shares, debt or loans in group companies;
  • its investments in the equity shares (including instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue) in group companies constitutes not less than 60% of its Total Assets;
  • it does not trade in its investments in shares, debt or loans in group companies except through block sale for the purpose of dilution or disinvestment;
  • it does not carry on any other financial activity referred to in Section 45I(c) and 45I(f) of the RBI act, 1934 except investment in bank deposits, money market instruments, government securities, loans to and investments in debt issuances of group companies or guarantees issued on behalf of group companies.
  • Its asset size is 100 crore or above and
  • It accepts public funds

Frequently Asked Questions

CICs having asset size of below Rs 100 crore are exempted from registration and regulation from the Reserve Bank, except if they wish to make overseas investments in the financial sector.

It means an arrangement involving two or more entities related to each other through relationships including those of a related party, joint venture, associate, promoter-promotee, and subsidiary – parent.

No, CICs/ CICs-ND-SI cannot accept deposits. That is one of the eligibility criteria.

The application form for CICs-ND-SI available on the Bank’s website can be downloaded and filled in and submitted to the Regional Office of the DNBS in whose jurisdiction the Company is registered along with necessary supporting documents mentioned in the application form.

Net Assets mean total assets excluding cash and bank balances, investment in money market instruments and mutual funds, Advance tax payments; and deferred tax payment.

“Public funds" includes funds raised either directly or indirectly through public deposits, inter-corporate deposits, bank finance and all funds received from outside sources such as funds raised by issue of Commercial Papers, debentures etc. but excludes funds raised by issue of instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue.

CICs (a) with an asset size of less than ₹100 crore, irrespective of whether accessing public funds or not and (b) with an asset size of ₹100 crore and above and not accessing public funds are not required to register with the Bank under Section 45IA of the RBI Act, 1934 in terms of notification No. DNBS.PD.221/CGM (US) 2011 dated January 5, 2011, and will be termed as ‘Unregistered CICs’.

ROLE OF COMPLIANCE CALENDAR LLP

Core Investment Companies are type of NBFCs with an asset size of over of Rs 100 Crores and accepts deposit, also involved in the business of acquisition of shares and securities satisfying certain conditions. Core Investment Companies (Reserve Bank) Directions, 2016 are applicable to Core Investment Companies. RBI has also notified Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs which shall be applicable w.e.f 1st October 2022. Compliance Calendar LLP has a team of skilled professionals well versed with changes in regulatory structure of NBFCs can provide you assistance and guidance with respect to compliances of Core Investment Companies. If you are looking to register your Non-Banking Financial Company (NBFC) as Core Investment Company, you are welcome to connect with us at info@ccoffice.in or call us at +91-9988424211 to book your one-time free consultation and we will be more than happy to help you out.