04 August 2009
A private limited company whose main object is investments, has invested in 100% equity of another company. The company does not have any other investments or activities.. Is it compulsory for the company to get itself registered with RBI as a NBFC under section 45-IA of RBI Act, 1934? What are the consequences if the company does not register itself with RBI as a NBFC? Please clarify my doubt..
04 August 2009
The company will be treated as an NBFC if its financial assets are more than 50 per cent of its total assets (netted off by intangible assets) and income from financial assets should be more than 50 per cent of the gross income. Both these tests are required to be satisfied as the determinant factor for principal business of a company.
NBFC require compulsory registration with the Reserve Bank to commence or carry on the financial business as the case may be. NBFCs incorporated before January 9, 1997 should have applied for such a Certificate of Registration within six months ending on July 8, 1997 to enable them to carry on their business of financial nature. NBCFs incorporated on or after January 9, 1997 are not allowed to commence the business of financial activities without obtaining a Certificate of Registration from the Reserve Bank. The auditors of all NBFCs are required to report directly to the Reserve Bank the non-compliance by any company of the above statutory provisions.
05 August 2009
Thank you sir. Still i have one doubt. This 50-50 test is to identify whether the principal business of the company is financing as per the press release dated 08/04/1999 right? What if the company states in its main objects clause of memorandum itself that its principal business is investing? Will the above 50-50 test apply to the entity even after having mentioned in its memorandum that its principal business is investing? Please clear it...
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