Asset Reconstruction Company also known as ‘ARC’, is a company registered under the companies act 2013 and is established for the purpose of securitization. An ARC shall be mandatorily registered with the RBI in accordance with the provisions of Section 3 of the SARFAESI Act. Asset Reconstruction Companies (ARC’s) are specialized financial institutions that buy the bad loans, Non-Performing Assets (NPAs) from banks & financial institution so that the banks and financial institutions have a cleaner balance sheet and enhanced liquidity.
Once the ARC buys the of financial assets of the banks and financial institutions, it becomes the owner of such financial asset and steps into the shoes of the lender bank or Financial Institutions. Thereafter, It attempts the recovery process, as if it were the original lender, in accordance with the applicable provisions of SARFAESI and other applicable statutes.
On and after the commencement of this Act, Assets Reconstruction Company(ies) shall mandatorily make an application for registration to the Reserve Bank within six months from such commencement. Any company cannot carry a business of asset reconstruction or securitisation until a certificate of registration is granted to it or as the case may be, rejection of application for registration is communicated to it.
An Asset Reconstruction Company can commence or carry on the business of securitisation or asset reconstruction after—
A Company shall fulfil the following conditions to be eligible to apply for registration as an Asset Reconstruction Company with the RBI:
➲ No losses should be incurred in any of the three preceding financial years
➲ For the realisation of the financial assets acquired there should be an adequate arrangement, for the purpose of securitisation or asset reconstruction.
➲ ARC shall be able to pay periodical returns and redeem on respective due dates on the investments made in the company by the qualified buyers or other persons;
➲ Directors of such company must have adequate experience in matters related to finance, financial management, securitisation and reconstruction management;
➲ No directors of such a company should be convicted of any offence involving moral turpitude;
➲ Sponsor of such company should be a fit and proper person in accordance with the criteria as may be specified in the guidelines issued by the Reserve Bank for such persons;
➲ Company has complied with or is prepared and capable to comply with prudential norms specified by the Reserve Bank;
➲ The Reserve Bank of India has issued specified guidelines and conditions which a company has to comply with in order to get registered as an ARC.
STEP 1: Prepare the application for registration of ARC in such form and manner as may be specified under the applicable provisions.
STEP 2: Preparation of the requisite drafts and attachments to be filed along with the application for registration of ARC
STEP 3: In order to grant the certificate of registration to an Asset Reconstruction Company the Reserve Bank India may conduct an inspection of the records, asset’s and book of reconstruction company to ensure that the CONDITIONS FOR Regsitration are fulfilled
STEP 4: After being satisfied that the conditions specified are fulfilled, The Reserve Bank of India may grant the certificate of registration to the asset reconstruction company to commence or carry on the business of asset reconstruction or securitisation and may impose such conditions as it deems fit.
NOTE: The Reserve Bank may reject the application made under if it is satisfied that the conditions specified in are not fulfilled
➲ Certified copy of latest MOA & AOA of the company.
➲ Certified copy of the certificate of incorporation.
➲ Board resolution stating that the company has not accepted any deposit.
➲ None of the directors shall be disqualified as per the Companies Act.
➲ Detailed information about the sponsor, their profiles, holdings etc.
➲ Detailed information about the management, their profiles, their duties, holdings etc.
➲ A certified copy of auditor certificate.
➲ Audited Balance Sheet of the last 3 years along with director and auditor report.
➲ Statement of owned funds.
➲ Information about related party transactions
a. The ARC may issue bonds and debentures in regard to funds to meet its funding requirements. But the issue of security receipts is the chief, and perhaps the unique source of funds for the ARCs.
b. In accordance with the SARFAESI Act, Security Receipts is a receipt or other security issued by a reconstruction company (or, in that case, a securitization company) to any qualified institutional buyer (QIB) for a particular scheme. The Security Receipt gives a right, title, or interest to the holder (QIB) in the financial asset purchased by the ARC. These SRs issued by ARCs have impaired assets to back them up.
c. "Qualified buyer" means a financial institution, insurance firm, bank, state-owned financial corporation, state-owned industrial development corporation, trustee, or other asset reconstruction firm that has been certified under the SARFAESI Act, 2002.
d. An ARC cannot raise funds from investors who are not qualified buyers (QB). A manufacturing company, for example, looking to invest surplus capital by investing in the ARC.
Acquisition and Valuation rule by ARC
The SARFAESI Act stipulates various measures for the reconstruction of assets that can be taken by ARCs. Including:
a. To take over or change the management of the borrower's business;
b. Sale or lease of borrower 's company
c. To join settlements and
d. Restructuring or debt rescheduling.
e. Strengthening security interests
f. The last step of 'security interest enforcement' means ARCs will take possession/sell/lease the sponsored asset such as ground, building etc.
ARCs and secured creditors cannot enforce the SRFAESI security interest unless the secured creditors agree to the value of at least 75 percent agree to exercise the right
1. What is asset Reconstruction Company?
A. Company registered under the company act 2013 for the purpose of securitization & get registration from RBI as per SARFAESI act under section 3 is called as Asset Reconstruction Company (ARC). The main business of asset Reconstruction Company is to buying bad loan from bank. These are specialized financial institution that buys the bad loan, Non Performing Assets (NPAs) from banks & financial institution so that to clean up their balance sheet.It act as recovery agent for the banks as it take over the loan and advances from bank and financial institution for recovery.
On and after the commencement of this Act, assets reconstruction company shall make an application for registration to the Reserve Bank before the expiry of six months from such commencement and cannot carry on the business of securitisation or asset reconstruction until a certificate of registration is granted to it or as the case may be, rejection of application for registration is communicated to it.
2. ARC objective?
A. Rapid growth of bad debts/ non-performing assets was the persistent barrier for healthy growth of Indian economy. Asset Reconstruction Companies were formed as specialised agencies to facilitate securitisation and asset reconstruction of non-performing asset thereby earliest resolution and taking the liquidity in the system.
3. Who is a Sponsor of ARC?
Any person holding no less than 10% of the paid-up equity capital of an ARC is a sponsor.
4. What is securitisation mean?
A. Securitisation means the acquisition from banks/FIs of financial assets by an ARC by raising funds from eligible buyers (QBs) by the issuance of security receipts (SRs) reflecting, or otherwise, an undivided interest in such financial assets.
5. Who are QIBs?
A. Qualified Buyer (QB) means a Financial Institution, an Insurance Firm, a Bank, a State Financial Corporation, a State Industrial Development Corporation, a Trustee or an ARC or any investment asset management company on behalf of a mutual fund, a Foreign Institutional Investor registered under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or any of its regulations, any category of
6. What is the definition of owned funds?
A. “Owned Fund” means the aggregate of paid up equity capital, paid up preference capital to the extent it is compulsorily convertible into equity capital, free reserves (excluding revaluation reserve), credit balance in Profit and Loss Account as reduced by the debit balance on the profit and loss account and Miscellaneous Expenditure (to the extent not written off or adjusted), book value of intangible assets and under / short provision against NPA / diminution in value of investments, and over recognition of income, if any; and further reduced by the book value of the shares acquired in a Securitisation Company or Reconstruction Company, and other deductions required on account of the items qualified by the auditors in their report on the financial statements;
We share the detailed and reasonable estimated costs, documents and prerequisites for the complete process before starting the process to ensure transparency.
Our team warrants hassle free documentation. We collect the necessary documents and share the relevant drafts to ensure a timely filing and delivery.
Upon collecting the necessary documents and information, we waste no time in preparation and filing of your application. development on your application is brought to your attention.
On successful completion of the case we share all the relevant documents electronically and physically along with an assurance to pay you back if something is wrong.
The Payment Card Industry Data Security Standard (PCI DSS) is a set of security standards designed to ensure that all businesses accepting, processing, storing or transmitting credit card information maintain a safe environment.
A company which has the object of cultivating the habit of thrift & savings amongst its members, receiving deposits from, and lending to, its members only, for their mutual benefit, and which complies with such rules as are prescribed by the Central Govt.
Registration of NBFC's may be cancelled by the RBI for not conducting business in the manner specified in the respective statutes or due to any non-compliance. However, in certain circumstances, it is possible to apply for the revival of the NBFC whose li
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 2013 of India, the main operations of NBFC include loans and advances, acquisition of shares, stock, bonds, hire-purchase insurance or chit-fund, but they do not inclu
An authorized company that is authorized to purchased foreign exchange from non-residents visiting India & residents & to sell foreign exchange for private & business travel purposes only is Known as Full fledged money changer (FFMC).
Payment services operated under financial regulation and performed from or via mobile is known as Mobile payment wallet. Mobile payment wallet also referred to as mobile money, mobile money transfer and mobile wallet.
An asset Reconstruction Company is a Company engaged in the business of buying bad loan from bank. These are specialized financial institutions that buys the bad loan, Non Performing Assets (NPAs) from banks & financial institution so that to clean up the
The firms incorporated under the Companies Act 2013 as the public or private limited company having objective of financial activity are known as NBFC or Non-Banking Financial Companies.
An autonomous group of people belonging to the same class willingly comes together to strive to be common economic, social and cultural objectives and criteria through a business that is jointly owned and democratically controlled by such citizens.
Catch comprehensive services for Mutual Fund Registration in India with our expert guidance. Navigate SEBI regulations seamlessly, establish your AMC, and unlock investment opportunities. Start now!
Our guide to Alternative Investment Fund (AIF) registration provides an in-depth look into the world of AIFs. We cover all three categories of AIFs - Category I, II, and III, each with its unique focus and benefits. From venture capital funds to hedge fun
CorpZo guides you through Depository Participants Registration, outlining the role, benefits, and eligibility of a DP. Learn about SEBI, NSDL, and CDSL regulations with us.
A Collective Investment Scheme (CIS), is an investment scheme in which several individuals come together to pool their money to invest in a particular asset(s) with the motive to share the returns derived from the said investment in accordance with the ag
The SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”) also apply to AIFs in the IFSC. The "SEBI" published Operating Guidelines for Alternative Investment Funds in International Financial Services Centres on November 26, 2018 "
An establishment in form of trust or institutions that records and maintains a complete record of transactions of investors for the benefit or convenience of mutual funds houses or listed entities are called as share transfer agents.
Merchant banker is a company and is combination of consultancy and banking services. Activities of merchant banker in India are regulated by SEBI (merchant banker) rule 1992.
Get the competitive edge in the digital payment landscape with Corpzo's expert guidance on obtaining the payment aggregator license in India. We help streamline your payment aggregation services while ensuring compliance with RBI guidelines. Unlock new op
A service providing entities which plays role of intermediate between banks and websites facilitating the communication of transaction information are known as payment gateway.
Organization which is registered under companies act 2013 or 1956 and which facilitate financing activity such as loan, savings, and insurance to the needy people or to those who are incapable of getting loan from banks and other financial institutions d
An Infrastructure Investment Trust (InvIT) is a collective investment scheme, similar to a mutual fund, that allows individual and institutional investors to invest directly in infrastructure projects in exchange for a small percentage of the income as a
CorpZo's services are designed to help businesses navigate the complex process of becoming a Third Party Application Provider within the UPI ecosystem. We ensure compliance with NPCI's SOPs, including adherence to market share cap regulations, and provide
Uniquely repurpose strategic core competencies with progressive content. Assertively transition ethical imperatives and collaborative manufactured products.Write About Us
© 2023 Corpzo Ventures Private Limited.