A securitisation company (SC) or reconstruction company (RC) may take over the management of the business if the dues are 25 per cent or more of the total assets of the borrower, and where more than 75 per cent of the total secured debt has been financed by more than one secured creditor.

These draft guidelines have been issued by the Reserve Bank of India (RBI) as part of the norms called ‘Change in or takeover of the management of the business of the borrower by SC/RC’ under Section 9(a) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (SARFAESI Act).

RBI has also specified other conditions that may compel such a takeover: willful default in repayment of the loan amount, selling or disposal of a significant part of the assets secured to the SC/RC without its prior approval, threatening by the borrower to discontinue the business, if the SC/RC is convinced that the management is acting in a manner that affects the interests of the creditors, if the management is incompetent to run the business, if serious dispute have arisen among the promoters and directors of the borrower and, simply, if there are grounds to believe that the borrower is unable to pay the debt.

Wilful default would mean non-payment of dues following siphoning of funds, failure to acquire financial assets, or non-utilisation of funds borrowed, or disposal of financed assets, misrepresentation of records pertaining to the transaction with the SC/RC, dealing/disposal of secured assets without the approval of the SC/RC or fraudulent transactions by the borrower in respect of the assets secured by the creditors.

Every SC/RC should frame a policy for the takeover of the management of the borrower company and make it available to the borrower. The policy should entail recommendation of takeover by an independent advisory committee appointed by the SC/RC, or an independent valuer, following due diligence. The board of directors of the company, including at least two independent directors of the SC/RC, should deliberate on the recommendations of the committee before the takeover happens.

New Ipad Application :Business Standard's all new IPad App Click here to download for free Other Stories      - Weekly: Uptrend continues, broader markets outperform - CBI begins in-house probe into AI's pay-off scam - British bankers arrested in tax probe - DLF net debt falls, to raise Rs 6,000 cr by FY13-end - Oil India Q3 net up 12% at Rs 1,014 cr

Read Business news in  Advertisements -  Now property search gets more exciting than ever before! -  IndianOil Citibank Card at Zero annual card fee -  Save over Rs.3000 with IndianOil Citibank Card -  Office 365 for professionals and small businesses. -  We live for our family. have you secured them? -  Are You Serious About Your Future? Click here to know more -  Financial Learning now made easier and more convenient. -  India's No. 1 Property Site. Click here to know more.. -  Win a Business Class Ticket to Europe..Know more.. -  Exim Bank Conclave on India - Africa Project Partnership. Know more.. -  Be part of it The World's Largest Aircraft. -  Creating Wealth made simple the SIP way. Know more.. -  Only Developer to give a guarantee on time space & rate. -  Buy Your Property with Our Triple Guarantee in India. -  Improve Patient Care & Experience. Click here to know more -   Introduce a New Automotive Luxury Car.. know more -  Health is Wealth..... Insurance + Savings... Know More...