A Core Investment Company (CIC) is a Non-Banking Financial Company (NBFC) that carries on the business of acquisition of shares and securities and holds not less than 90% of its net assets in the form of investment in equity shares, preference shares, bonds, debentures, debt or loans in group companies. Core investment companies are required to be registered with RBI under section 45 IA of the RBI Act 1934 and obtain a Certificate of Registration (CoR).
Requirements to be a Core Investment Company-
- This type of business, which engages in operations related to investing in shares and securities, has been categorized by the RBI as an NBFC.
- These businesses maintain investments as equity, preferred shares, debt, and loans. Such an investment is 90%.
- This investment must equal or exceed 60% of the group’s total assets in the form of equity in the enterprises.
- For Core Investment Companies, such investment trading-related activities are not permitted. These businesses can, however, engage in transactions like divestitures or dilution.
- Most of these businesses exclusively engage in investing operations, such as making investments in other financial institutions, government securities, money market securities and other forms of instruments.
The advantages of establishing a core investment company
The advantages of establishing a core investment firm are as follows:
- Execute Investment: The entity can carry out various forms of investments in shares, equity, loans, and other types of securities by establishing this firm.
- Compliance with RBI: This type of corporation would be founded by according to RBI regulations. Such a firm is established in accordance with RBI-related regulations. The RBI has thought of creating a unique rule for CIC in India, nevertheless.
- Company for Systematic Core Investments: Such a corporation is established as a legal person with assets worth more than Rs 100 crore.
Core Investment Company Categories–
- Companies engaged in Core Investment cannot receive deposits. This is one of the fundamental requirements for a Core Investment Company’s eligibility. The CIC’s asset classification standards are as follows:
- Registered CICs that have assets under Rs. 100 crores must abide by the 2015 Non-Systematically Important NBFC Prudential Norms.
- Core adheres to the standard outlined in the 2015 Systematically Important NBFC Prudential Norms Directions for those having assets over Rs. 100.
Exemptions from Registration
- According to the RBI Act, CICs with assets under Rs. 100 crores are exempt from registration as CICs. The individual sizes of each CIC in a given group are added to determine the total asset size. The Core Investment Company must register if the total asset value is $100 crore or greater. CICs that do not access public funds and have a minimum net worth of Rs. 100 crores are exempt.
- If CICs with assets under Rs. 100 are considering financial sector investments abroad, they must register with the RBI on a mandatory basis. Additionally, they must adhere to all rules that apply to registered CIC-ND-SI. Nevertheless, if the investment is made in
General Obligations for a Core Investment Company
- 90% or more of the Core Investment Company’s net assets must be invested in equity shares, preferred shares, bonds, debentures, debt, or loans in group firms. weighing in 10% of the only net assets that CICs may keep outside the group are real estate or other fixed assets required for business operations; financial investments or loans in non-group enterprises are not permitted.
- at least 60% of the company’s net asset value must be invested in the shares of the group firms.
- On behalf of the group firms, the company may provide guarantees.
- Bank deposits, money market mutual funds, liquid mutual funds, other money market instruments, government securities, bonds and debentures of group firms, and the provision of loans to group companies are all possible investment options.
- A CIC-ND-SI that meets all the requirements listed above and has assets of Rs. 100 crore or more is considered to be a systematically important Core Investment Company. The Core Investment Companies (Reserve Bank) Directions, 2016, which apply to such a firm, require it to be registered with the Reserve Bank of India since functioning without a Certificate of Registration from the central bank is considered as a violation.
Registration Process of CIC-ND-SI
- The application for registration must be downloaded from the RBI website by the applicant. https://rbidocs.rbi.org.in/rdocs/Forms/PDFs/CIC260411F.pdf is the link to the application form.
- It must be completed and sent to the regional office of the Department of Non-Banking Supervision (DNBS) with the necessary supporting paperwork. The entity under whose authority the company is registered must be the DNBS.
- This application must be submitted with the necessary checklists for the paperwork needed to register a core investment business.
- The same can be called by RBI if extra papers are needed to be supplied. If the applicant must provide documentation, it must be submitted within 30 days following the notification.
- Certain businesses are exempt from registration, however these companies have to pass a Board Resolution that they will not in the future indulge in accessing public funds.
Capital Requirements for CIC-ND-SI
- The CIC-ND-adjusted SI’s net worth (ANW) must exceed 30% of the risk-weighted assets (RWA).
- When calculating the aggregate asset size, it is necessary for each CIC in the group to register as an individual CIC-ND-SI and use their own adjusted net worth.
- As described by the Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (RBI) Directions, which were released in 2007, such adjusted net worth can be interpreted as an accumulation of the funds.
- In addition, 45% of the total is regarded to be a standing credit for the revaluation reserve, which may be increased or decreased by a specific amount.
Documents Needed to Register a Core Investment Company
For the purpose of registering as a Core Investment Company, the following papers are necessary:
- Information about the business: Certificate of Incorporation (Copy)
- Articles of Association and the Memorandum of Association (MOA and AOA)
- Registration-related application form
- A copy of the application must be preserved at the company’s registered office.
- The application must contain all of the key management executive’s signatures. Additionally, the application must include the company’s common seal.
- Information about the company’s executives and directors (DIN)
- Company’s CIN number
- PAN Details pertaining to the Company
- Activities that the Core Investment Company conducts (Information on)
- Information about the statement