Requirements for Prospective NBFCs
Reservation of Company’s Name (Can be reserved for 60 days)
Formation of NBFCs
- Application to SECP for Permission to form a NBFC along with the following docs:
- Form-I of the NBFC Rules, 2003 along with all relevant supporting documents as per annexure to form-I of NBFC Rules, 2003.
- Processing Fee of Rs. 250,000/- (Rs. 125,000 for NBMFCs)
- Assessment of Fitness and Propriety of the proposed sponsors/promoters as well as proposed directors and CEO is carried out at this stage based on the aforesaid information.
- Grant of Permission for formation of NBFC by the Commission through Order.
- Permission is valid for six months (extendable for a further maximum period of 3 months).
- Promoters shall incorporate the company, meet minimum equity and other requirements and apply for license to undertake NBFC within this period.
Incorporation of NBFCs
- Promoters shall incorporate the company as a private or public company at the relevant Company Registration Office.
License to Carry-Out the Business as NBFC
- Promoters, after incorporation of the company, shall apply to the Commission for grant of License to undertake the business as an NBFC.
- The detail of documents required and procedure for grant of license is tabulated below:
|S #||Requirement of Law|
|1||Incorporation as a limited company (any form)|
|2||Authorized, subscribed and paid-up share capital of the company (sponsors’ equity indicated separately);Minimum Equity Requirements:Rs. 1,000 million – New deposit taking NBFCsRs. 750 million – Existing NBFCs having Investment Finance Services (IFS) licenseRs. 500 million – Existing deposit taking NBFCs having Leasing LicenseRs. 100 million – Non-deposit taking NBFCs having IFS license (to carry out all types of lending)Rs. Rs. 50 million – NBFCs having any one of Microfinance, Leasing, Discounting or Housing Finance Services license.|
|3||Minimum number of directors is 2 for private limited Company, 3 for public limited company and 7 for a listed company, as stipulated in Companies Act, 2017|
|4||1 or one third, whichever is higher, of the directors should be independent|
|5||One of the directors should have relevant experience of at least 5 year at a senior management level if the total number of directors including CEO is less than or equal to three. If the number of directors including CEO is greater than 3 then 2 of the directors should have relevant experience of at least 5 years at a senior management level. (Reference: Schedule I of the NBFC Rules, 2003)|
|6||Names and addresses of directors and number of shares held by each of them.|
|7||Directors’ interest, direct or indirect, in any other company with details of such interest.|
|8||Assessment of fitness & propriety of the following as per Fit and Proper Criteria provided in Schedule IX of NBFC Regulations, 2008 of (i) Promoters and sponsors; (ii) Proposed directors including chairman of the board; and (iii) CEO, on the following parameters:Integrity and track record of such person; Financial soundness of such a person; Competence and capability of the person; and Conflict of interest of such person with the business of the NBFC and Investment|
|9||Details of persons or group controlling the company including major shareholders with number and value of shares held;|
|10||Names of holding, subsidiary and associated undertaking, if any;|
|11||Details of qualified staff engaged|
|12||Reasons for selecting the proposed place of business with statistical data|
|13||Additional facts in support of this application|
|14||Certified copies of the memorandum and articles of association and certificate of incorporation are enclosed|
|15||An affidavit as to the correctness of the above information by the chief executive and two directors.|
|16||A receipt of rupees Rs. 250,000 for Microfinance, Housing Finance, Discount House, Leasing license and Rs. 500,000 for NBFC with IFS license, being the processing fee|
|17||Auditors certificate for calculation of equity|
|18||Copy of annual accounts|
Detailed process for Permission to Form NBFC and Grant of License to undertake business as NBFC is provided under rule 4 and rule 5 of Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003. Fit & Proper Criteria is provided in Schedule IX of the Non-Banking Finance and Notified Entities Regulations, 2008.
*Requirements for permission to raise deposits are detailed at regulation 14 of the Non-Banking Finance Companies and Notified Entities Regulations, 2008.
Some of the additional key requirements for deposit taking NBFCs are:
3 years operations as lending NBFC
Credit Rating (minimum A-)
Compliance with CAR
Listing on stock exchange
Additional Requirements for Security Clearance of Foreign Subscribers/Sponsors
Further, please be informed that regulation 15 of the Companies (Incorporation) Regulations 2017 (the Regulations) provides additional requirements for security clearance of foreign subscribers, whereby regulation 3(ii) of the Regulations provides that the companies having foreign subscribers/officers who are Afghan or Indian national or of Afghan or Indian Origin will be incorporated after receipt of security clearance and not on the basis of an undertaking. In this regard, following documents will be submitted to SECP by the applicant for security clearance of foreign director(s)/subscriber(s): –
- Passport of all proposed foreign subscribers/ directors
- Copy of CV/bio data of all foreign directors (including nationality, country of origin, local and foreign address, local and foreign contact number, Father’s Name) along with passport size photographs.
- Application for incorporation on Form II
- Memorandum & Articles of Association of the proposed company (if separate application for Company Incorporation)
Regulation 15 of the Regulations is reproduced below for your reference:
15. Additional requirements for foreign subscribers and security clearance. – (1) In case the subscriber is a foreign company or a foreign body corporate, the registrar shall require additional information including but not limited to, the profile of the foreign company or foreign body corporate, detail of its directors, their nationality and country of origin, copy of its charter, statute or memorandum and articles etc.:
Provided that the copy of any charter, statute, memorandum, articles or other instrument, constituting or defining the constitution of a foreign company or a foreign body corporate required to be filed with the registrar shall be duly certified to be a true copy by –
(i) the public officer in the country where the foreign company or foreign body corporate is incorporated to whose custody the original is committed; or
(ii) a Notary public of the country where the foreign company or foreign body corporate is incorporated; or
(iii) an affidavit of a responsible officer of the foreign company or foreign body corporate in the country where the company is incorporated:
Provided further that the signature and seal of the official referred to in clause (i) or the certificate of the Notary Public referred to in clause (ii) above shall be authenticated by a Pakistan diplomatic consular or consulate officer and the certificate of the officer of the foreign company or foreign body corporate referred to in clause (iii) above shall be signed before a Pakistan diplomatic consular or consulate officer.
(2) In case the subscriber to the memorandum is an individual of foreign nationality, he may be required to file additional documents as deemed necessary by the registrar.
(3) The Commission shall obtain security clearance from Ministry of Interior (MoI) in following cases and in the manner prescribed hereunder:
(i) companies having foreign (other than Afghan and Indian national or origin) subscribers/officers will be incorporated on the basis of an undertaking of each foreign subscriber /officer and case shall be forwarded for security clearance:
Provided that in case name of subscriber/officer is not security cleared by MoI, the subscriber/officer and the company, shall take immediate steps for replacement and shall transfer shares if any, held by the subscriber;
(ii) companies having foreign subscribers/ officers who are Afghan or Indian national or of Afghan or Indian Origin will be incorporated after receipt of security clearance;
(iii) security services provider companies will be incorporated after receipt of security clearance from MoI.
(4) The manner of security clearance shall be subject to any change in the security policy of government from time to time.”
Disclaimer: Please note that the above view point / comments do not constitute an approval, a legal opinion or legal vetting. It is the responsibility of the persons who are subject to provisions of the law to determine their obligations under the law. This should not be treated as binding on the Commission in any way.