NBFC Legal Support

NBFC Legal Support ensures compliance with RBI regulations, contract drafting, dispute resolution, and regulatory guidance for smooth operations.

  • More Than 20 years of experience
  • Team Comprises of Ex Bankers, CAs, CSs and Lawyers
  • Fully Integrated Services
  • Transparency in engagement
  • Solution based approach
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Our Services

Why is Legal Support Necessary for NBFCs?

In recent years, the role of NBFCs in India has seen significant growth, as businesses increasingly turn to them for loan services. Unlike traditional banks, the loan acquisition process through NBFCs is often more streamlined and accessible. NBFCs play a crucial role in driving infrastructure development and creating employment opportunities.

Our legal services for NBFCs encompass due diligence on loan product documents, title verification reports, property search titles, NBFC registration, assistance with filing applications, document preparation, and securing necessary approvals from the Reserve Bank of India (RBI).

NBFCs in India are regulated by the country’s apex financial institution, the RBI, and are subject to stringent regulations to ensure their proper functioning and the growth of the lending sector. Legal support for NBFCs is essential to help meet government obligations, ensure compliance with regulations, and avoid penalties or the accumulation of non-performing assets (NPAs).

Review of Loan Documents

The review of loan documents is a critical aspect of legal support services for NBFCs. It ensures that all loan agreements and related documents are legally sound, compliant with applicable regulations, and protect the interests of the NBFC.

Why Loan Document Review is Crucial for NBFCs:

Regulatory Compliance: Ensures that the NBFC complies with the RBI’s stringent regulations and guidelines, reducing the risk of penalties or legal challenges.

Risk Management: Helps mitigate the risk of non-performing assets (NPAs) and ensures the loan terms are clear and enforceable.

Legal Protection: Provides legal protection to the NBFC by ensuring that all loan agreements are legally sound and will hold up in the event of disputes.

Avoiding Future Disputes: Thorough review reduces the risk of future conflicts or litigation with borrowers.

Legal support for the review of loan documents is crucial for NBFCs to ensure that their loan agreements are robust, compliant, and legally enforceable. This service helps protect the NBFC’s interests, ensuring smooth operations and reducing exposure to potential legal and financial risks.

Legal Notice

Legal notice services are a vital tool for NBFCs to manage loan defaults, breaches of contract, and other legal disputes effectively. These notices act as a formal warning and help prevent further escalation by offering an opportunity for the borrower or other party to resolve the issue. By employing legal notice services, NBFCs can protect their rights, recover dues, and ensure compliance with regulatory guidelines, minimizing financial risks and operational disruptions.

Some of the key Legal Notice Services for NBFCs:

  1. Loan Default Notices
  2. Demand Notices for Payment Recovery
  3. Notice for Breach of Contract
  4. Notice for Non-Compliance with Terms of Agreement
  5. Notice of Intent to Initiate Legal Action
  6. Legal Notice for Recovery of Non-Performing Assets (NPAs)
  7. Termination of Agreement Notices

Arbitration/Litigation

Traditionally, litigation has been the primary method for resolving financial disputes. However, due to delays in grievance redressal and the complexity of multiple jurisdictions, businesses are increasingly opting for alternative dispute resolution (ADR) methods such as arbitration and mediation.

To ensure a smoother lending process and mitigate disputes, contracts and agreements now commonly include an arbitration clause as an alternative resolution mechanism. Custom-tailored solutions help financial institutions navigate compliance issues and streamline dispute resolution.

  Efficient Dispute Resolution: Arbitration is often a quicker and more efficient means of resolving disputes compared to traditional litigation, which can help reduce operational disruptions for NBFCs.

  Risk Mitigation: Legal services help mitigate the financial and reputational risks associated with disputes, ensuring that NBFCs’ interests are safeguarded in complex legal matters.

  Regulatory Compliance: Legal experts ensure that NBFCs comply with all regulatory and legal requirements in dispute resolution, helping avoid penalties and adverse regulatory action.

  Recovery of Dues: Legal services help recover outstanding loans, ensure the enforcement of security interests, and manage debt recovery proceedings, which are crucial for maintaining an NBFC’s financial health.

  Expert Representation: Skilled lawyers with expertise in financial laws and regulations represent the NBFC in court or arbitration proceedings, ensuring the best outcome for the company.

FAQ's

With the help of NBFC legal support, you can:

  1. Check your eligibility for non-banking financial company registration.
  2. Prepare documents.
  3. Certify your fiscal statements and net owned funds.
  4. Apply for NBFC registration online.
  5. Clarify the RBI’s queries, if applicable, during the incorporation process.
  6. Sign the documents upon the grant of certification.

Go through the following list of entities that will gain an advantage from acquiring NBFC legal advice:

  1. Startups are looking to enter the digital lending market segment.
  2. Fintech companies that want to merge, acquire, or register as an NBFC.
  3. Existing non-banking financial companies that need assistance with debt settlement, audit, annual filing compliance, and personal loan recovery.

The legal framework for loan recovery is as follows:

  1. The Negotiable Instrument Act of 1881: This includes provisions for cheque bounces related to debt repayments.
  2. SARFAESI Act of 2002: This legislation provides a framework for non-banking financial companies on asset-based recoveries.
  3. Indian Contract Act of 1872: This act governs the roles and responsibilities between the NBFC and its agreements and contracts with borrowers, third-party vendors, and associated partners.
  4. Civil Procedure Code of 1908: This law provides sections and rules for the recovery of debt through civil filings.

The list of documents needed for NBFC registration is as follows:

  1. KYC, including Aadhar card and PAN of all directors and managers.
  2. Memorandum of Association.
  3. Articles of Association.
  4. Charter of the proposed company.
  5. Incorporation certificate authenticated by the Ministry of Corporate Affairs.
  6. Goods and Services Tax Number.
  7. Business plan and detailed project report.
  8. A certified copy of the director’s and shareholders’ net worth.
  9. A CA-certified statement about the company’s net owned fund (NOF).
  10. Last three years’ financial statements (audited).

The different types of non-banking financial company legal services are as follows:

  1. Legal notice sending.
  2. Website policy drafting, including terms & conditions, refund, privacy, child-safety, credit, and recovery policies.
  3. Formation of leases, assets, and liquidation agreements.
  4. Drafting loan and debt settlement agreements.
  5. Complete legal documentation for NBFC registration and RBI-specific license renewals.
  6. AML and KYC policy compliance.
  7. Annual return filing.
  8. Tax reporting.
  9. Advice on mergers & acquisitions and business restructuring.
  10. Compliance and implementation of the fair practice code & FEMA.

The NBFC legal service providers facilitate the following:

  1. Provide an insight into the proposed company that you want to merge or partner with through mergers & acquisitions.
  2. Help manage post-restructuring compliance requirements.
  3. Acquire approvals from the RBI.
  4. Draft mandatory documents to support the said transfer or merger of the NBFC with a fintech or any other company.

Check out the key points mentioned below to fulfil compliance through NBFC legal support:

  1. Annual financial reporting.
  2. Quarterly and monthly filings.
  3. Notification to the RBI about any change in the company’s ownership or organizational structure.
  4. Change in internal KYC, AML, loan recovery, and credit policies as per RBI’s latest updates.
  5. Employee training on new legal NBFC developments.

The different types of websites and internal governance policies are as follows:

  1. Loan recovery policy
  2. Credit policy
  3. Anti-Money Laundering policy
  4. Privacy policy
  5. Terms & Conditions
  6. Refund policy
  7. Fair Practice Code
  8. Risk Management and Grievance Redressal System

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