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TMI BlogREGISTRATION OF SECURITISATION/RECONSTRUCTION COMPANIESX X X X Extracts X X X X X X X X Extracts X X X X ..... REGISTRATION OF SECURITISATION/RECONSTRUCTION COMPANIES - By: - Mr. M. GOVINDARAJAN - Corporate Laws / IBC / SEBI - Dated:- 19-8-2015 - - The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ( Act for short) was enacted to regulate securitization and reconstruction of financial assets and enforcement of security interest and for matters connected therewith or incidental thereto. Requirement of registration Section 3 of the Act provides for the registration of securitization companies or reconstruction companies. Any company registered under the Companies Act, 1956 or the Companies Act, 2013 may commence or carry on the business of securitization or reconstruction ( company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for short) by obtaining a certificate of registration granted under Section 3(1). For registration the company is to own fund of not less than two crore rupees or such other amount not exceeding 15% of the total financial assets acquired or to be acquired by the securitization company or reconstruction company, as the RBI may, by notification, specify. The RBI may specify different amount of owned fund for different class or classes of securitization companies or reconstruction companies. If the existing companies did not obtain a certification of registration within six months from the commencement of this Act, the said companies are not entitled to carry on the business. Conditions for registration Every application for regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stration shall be made in the prescribed form and in such manner as may be specified to the Reserve Bank of India. On receipt of the application RBI may inspect records or books of the company. If RBI is satisfied as to the fulfillment of the following conditions that- the company has not incurred losses in any of the three preceding financial years; the company has made adequate arrangements for realization of the financial assets acquired for the purpose of securitization or asset reconstruction and shall be able to pay periodical returns and redeem on respective due dates on the investments made in the company by the qualified institutional buyers or other persons; the directors of the company have adequate professional exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erience in matters related to finance, securitization or reconstruction; the board of directors does not consist of more than half of its total number of directors who are either nominee of any sponsor or associated in any matter with the sponsor or any of its subsidiaries; any of its directors has not been convicted of any offence involving moral turpitude; a sponsor, is not a holding company of the company or does not otherwise hold any controlling interest in such company; the company has complied with or is in a position to comply with prudential norms specified by the RBI; the company has complied with one or more conditions specified in the guidelines issued by the RBI for the said purpose. After being satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the conditions specified above are fulfilled RBI may grant a certificate of registration to the company to commence or carry on business of securitization or asset reconstruction, subject to such conditions, which it may consider, fit to impose. Rejection of application If the above said conditions are not fulfilled RBI may reject the application. Before rejecting the application RBI may give the company a reasonable opportunity of being heard. Prior approval for substantial change in company If there is a substantial change in the company the said company shall obtain prior approval of the RBI for any substantial change in management or change of location of registered office or change of name. In this regard the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of RBI is final as to whether the change in management of the company is a substantial change. Explanation to this section provides that the expression substantial change in management means the change in management by way of transfer of shares or amalgamation or transfer of the business of the company. Cancellation of certificate of registration Section 4 of the Act gives powers to RBI to cancel a certificate of registration. The said section provides that RBI may cancel a certificate of registration granted to the company, if such company- ceases to carry on the business; or ceases to receive or hold any investment from qualified institutional buyer; or has failed to comply with any conditions subject to which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the certificate of registration has been granted to it; or at any time fails to fulfill any of the conditions specified in Section 3; or fails to- comply with the directions issued by the RBI under the provisions of this Act; or maintain accounts in accordance with the requirements of any law or any direction or order issued by the RBI under the provisions of this Act; or submit or offer for inspection its books of account or other relevant documents when so demanded by RBI; or obtain prior approval of the RBI required under Section 3 for substantial change. Before cancelling a certificate of registration on the ground that- the company has failed to comply with any conditions subject to which certificate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or registration has been granted to it; the company has failed to comply with any of the conditions under Section e; or the company has failed to obtain prior permission in case of substantial change in the company RBI shall give the company an opportunity to take necessary steps to comply with such provisions or fulfillment of such condition. Appeal provision A company aggrieved by the order of cancellation of certificate of registration may prefer an appeal to the Central Government within 30 days from the date on which such order is communicated to it. The company cannot file appeal against the order of rejection of the application for certificate of registration. Liability of the company on cancellation of regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration or rejection of application Before rejecting the appeal filed by the company the Central Government is to give a reasonable opportunity of being heard to the company. A company, which is holding investments of qualified institutional buyers and whose application for grant of certificate of registration has been rejected or certificate of registration has been cancelled shall, notwithstanding such rejection or cancellation, be deemed to be a company until it repays the entire investments held by it together with interest, if any, within such period as RBI may direct. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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