The Ministry of Corporate Affairs (MCA) is a regulatory body and also plays a very crucial role as guiding authority to all registered entities in India with regard to compliance reporting and statutory management of operations.
The authority on 8th February 2019 issued the Companies (Significant Beneficial Ownership) Amendment Rules, 2019 to bring changes in policies and regulations for detection of unauthorized beneficial ownership to curb tax evasion, Benami transactions, money laundering and other illegal transactions ongoing in the corporate sector.
The new rules will simply add answerability to the corporate sector to their respective ROCs concerning reporting of their Significant Beneficial Owner and distinct representation of their actual registered beneficial owners.
Who is a Significant Beneficial Owner?
As per the amended Companies (Significant Beneficial Ownership)Amendment Rules, 2019, SBO is an individual as referred to in Section 90(1), who is acting alone or together or through one or more persons or trust along with possessing one or more of the following rights or entitlements (beneficial interest) in the reporting company in the form of :
- Shareholding for not less than 10% of the shares (25% earlier) in the company indirectly, or together with any direct holdings;
- Holding of voting rights in the shares of the company indirectly or together with any direct holdings for not less than 10% (25% earlier );
- Holding a right in the reporting company to receive or participate in not less than 10% (25% earlier ); of the total distributable dividend or any other distribution in a financial year through indirect holdings or together with any direct holdings ;
- Holding a right to exercise or actually exercise, significant influence or control in any manner on the company other than through direct holdings alone.
In the case of Direct Holding
For the above cases, individual holding shares in the reporting company will be said to be a person – directly holding the right or entitlement in the shares or voting rights of the company only if:
- The individual holds such rights or entitlements on shares of the company in his own name;
- The individual has specified for his beneficial interest in the shares of the company by placing a declaration as per Section 89(2).
In the case of Indirect Holding
Please refer the table below for different members:
|Member||Criteria to be recognized as SBO|
|When a member is a body corporate excl. LLP, (Registered in India or Abroad)||Individuals holding a majority stake in that member.
The individual holds a majority stake in the ultimate holding company of that member.
|When a member is a HUF||Karta|
|When a member is a partnership entity||Individual
– Is a Partner
– Holds majority stake in the body corporate which is a partner of the partnership entity
– Holds majority stake in the ultimate holding company of the body corporate which is a partner of partnership entity.
|Member is a Trust||The individual shall be the
– The trustee (for discretionary or charitable trust )
– The beneficiaries (for a specific trust )
– The author or settler( for a revocable trust)
Note: Holding of shares in the reporting company shall be considered only in the form of global depository receipts (GDRs), compulsorily convertible preference shares and compulsorily convertible debentures.
Duty of Reporting Companies
For beneficial owners other than inspected registered owners (Section 89) of the company the reporting company is required to identify their respective SBOs and quote them to make a declaration of their interest in different compliance forms. Forms specified for the purpose include:
– submission of the declaration of beneficial interest by identified SBOs
– submission of declaration in case of the subsequent change of any individual ownership in the reporting company to SBO.
|Form BEN-2||On receipt of the declaration from individuals, the reporting company shall file a return using the form with ROC with applicable fees as prescribed.|
|Form BEN-3||Required in the filling of Register of SBO|
|Form BEN – 4||For Issue of notice/application to NCLT by reporting company in furtherance of failure of recognition as SBO or submission of information by requiring individuals.
Exemption and Consequences
The Companies (Significant Beneficial Ownership) Amendment Rules, 2019 shall not be applicable in case shares of the reporting company are held by:
– Authorities recognized under Section 125(5) of the Act.
– Holding subsidiary of the reporting company
– Any central or state or any local authority
– SEBI Registered investment vehicles (MF, AIF, REITs, InVITs, etc)
– RBI, IRDA approved entities
The following penal provisions shall become applicable on SBOs and reporting companies for non-filling of declaration forms:
– For non-filling of BEN-1 by SBOs, a fine amount between Rs 1 lakh to Rs 10 lakh shall be levied as a penalty. In case of continuing default, additional Rs 1000/- per day will also be included.
– For companies in default of reporting a sum penalty between Rs 10 lakh to Rs 50 lakh shall be charged with a continuing default penalty charge of Rs 1000/- per day.
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