GUIDANCE NOTE ON SIGNIFICANT BENEFICIAL OWNERSHIP

MCA has replaced Significant Beneficial Rules 2018 and come up with  Companies (Significant Beneficial Ownership) Amendment Rules, 2019 on 08.02.2019 in order to curtail the misuse of various multi layered entities and protect various benami & money laundering Transactions.

If the registered shareholder is not the beneficial shareholder of the company then the registered and beneficial shareholder is required to make a declaration with the Company and the Company in turn shall file a return to Registrar of Companies. Provision of Section 90 of Companies act 2013 along with rules will apply.

Significant Beneficial Owner(SBO)

A person is considered as Significant Beneficial Owner if he is acting alone or together with more persons or trust holds a beneficial interest of 10% or more, (earlier it was 25%).

The Amended Companies (Significant Beneficial Owners) Amendment Rules, 2019 describes Significant beneficial owner” means an individual referred, who acting

a)     alone or together, or

b)     through one or more persons or

c)     trust,

d)     possesses one or more of the following rights or entitlements in such reporting company, namely:-

                                     i.   holds indirectly, or together with any direct holdings, not less than ten percent of the shares;

                                   ii.          holds indirectly, or together with any direct holdings, not less than ten per cent of the voting rights in the shares;

                                 iii.          has right to receive or participate in not less than ten per cent. of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings;

                                 iv.          has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct holdings alone:

WHEN DOES THE INDIVIDUAL CONSIDERS AS HOLDING RIGHT OR ENTITLEMENT IN THE COMPANY?

An individual shall be considered to hold a right or entitlement directly in the reporting company, if he satisfies any of the following criteria,

a)     the shares in the reporting company representing such right or entitlement are held in the name of the individual;

b)     the individual holds or acquires a beneficial interest in the share of the reporting company under section 89, and has made a declaration in this regard to the reporting company.

OBLIGATIONS

A)   SIGNIFICATION BENEFICIAL OWNER

Every SBO is required to make a declaration in BEN-1 to the Company with in ninety days from 08.02.2019 (the date of commencement of the Companies (Significant Beneficial Owners) Amendment Rules, 2019) and every individual, who subsequently becomes a significant beneficial owner, or where his significant beneficial ownership undergoes any change shall file a declaration in Form No. BEN-1 to the company, within thirty days of acquiring such significant beneficial ownership or any change therein.

Explanation.- Where an individual becomes a significant beneficial owner, or where his significant beneficial ownership undergoes any change, within ninety days of the commencement of the Companies (Significant Beneficial Owners) Amendment Rules, 2019, it shall be deemed that such individual became the significant beneficial owner or any change therein happened on the date of expiry of ninety days from the date of commencement of said rules, and the period of thirty days for filing will be reckoned accordingly.

B)    COMPANY

a)     Every reporting company is required to identify the existence of a significant beneficial owner and necessitate him to make a declaration in Form No. BEN-1.

b)     The reporting company shall file a return in Form No. BEN-2 with the Registrar of Companies within a period of thirty days from the date of receipt of declaration by SBO in Form No. BEN.1 along with the fees as prescribed in Companies (Registration offices and fees) Rules, 2014.

c)     Every Company shall maintain a register of interest declared or any change thereof  which shall include name, date of birth , address of individual, details of ownership in the Company and such other details in Form No.- BEN 3. 

*   The above mentioned register shall be open to inspection by any member of the Company during business hours, of not less than two hours, on every working day as the board may decide, on payment of such fee as may be specified by the company but not exceeding fifty rupees for each inspection. 

 d) The company shall give notice in Form No. BEN-4, to any person whom the company knows or has reasonable cause to believe—

(a) to be a significant beneficial owner of the company;

(b) to be having knowledge of the identity of a significant beneficial owner; or

(c) to have been a significant beneficial owner of the company at any time during the three years immediately preceding the date on which the notice is issued,

and who is not registered as a significant beneficial owner with the company.

* The information required by such notice shall be given bythe concerned person within a period not exceeding thirty days of the date of the notice.

APPLICATION TO TRIBUNAL

The reporting company shall apply to the Tribunal within 15 days from the expiry of period specified in notice , -

(i)              where any person fails to give the information required by the notice in Form No. BEN-4, within the time specified therein; or

(ii)             where the information given is not satisfactory,

for order directing that the shares in question be subject to restrictions, including –

(a) restrictions on the transfer of interest attached to the shares in question;

(b) suspension of the right to receive dividend or any other distribution in relation to the shares in question;

(c) suspension of voting rights in relation to the shares in question;

d) any other restriction on all or any of the rights attached with the shares in question.

The Tribunal may, after giving an opportunity of being heard to the parties concerned, make such order restricting the rights attached with the shares within a period of sixty days of receipt of application or such other period.

The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal for relaxation or lifting of the restrictions placed), within a period of one year from the date of such order.

NON APPLICABILITY OF NEW SBO RULE

a) the Authority constituted under Section 125(5).
b) Its holding reporting Company
c) the Central or State Government 
d) Entities governed by Central or  State Government or partly by any of them.
e) All investment vehicles registered by SEBI.
f) Investment vehicles governed by RBI/IRDA, Pension Fund Regulatory and Development Authority .