Disclosure of Significant Beneficial Ownership
The Ministry of Corporate Affairs (MCA) on June 13, 2018 notified Section 90 of the Companies Act, 2013 (Act); and notified Companies (Significant Beneficial Owners) Rules 2013. This rule came into effect on June 14, 2018. These provisions require certain compliances to be followed by a Significant Beneficial Owner and a company.
Who is a “Significant Beneficial Owner”?
“Significant Beneficial Owner” means an individual who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds ultimate beneficial interest of not less than 10% in shares of a company or the right to exercise, or the actual exercising of significant influence or control in a company.
This applies to the (i) individual who is acting alone or together with one or more persons (includes partnerships) (ii) includes a trust (iii) person resident in India or outside India.
Where no natural person is identified in point no. A and B in the table above, the Significant Beneficial Owner is the relevant natural person who holds the position of senior managing official.
What is the obligation of Significant Beneficial Owner?
Every existing Significant Beneficial Owner is obligated to file a declaration in Form No. BEN-1 with the respective company. This declaration is to be made by September 10, 2018.
Every Significant Beneficial Owner shall file any change in his significant beneficial ownership within 30 days to the company.
Every individual, who acquires significant beneficial ownership in a Company, shall file a declaration in Form No.BEN-1 to the Company within 30 days of acquiring such significant beneficial ownership.
What are the obligations of the Company?
The company receiving the declaration has to maintain a register of Significant Beneficial Owners.
The company has to file a return in Form No. BEN-2 of significant beneficial owners of the company and changes therein with the Registrar within 30 days from the date of receipt of the declaration.
Maintain a register of significant beneficial owner in Form No. BEN – 3.
Also, if the Company knows or has reason to believe that someone is s Significant Beneficial Owner (or has been a Significant Beneficial Owner in last 3 years) and is not registered with the company as a Significant Beneficial Owner then, the company is required to give notice to such person seeking information in Form No. BEN-4.
Consequences of non-disclosure by Significant Beneficial Owner
Shares may be made subject to the restriction on transfer.
All rights in shares held by such Significant Beneficial Owner shall be suspended, including, voting rights, dividend etc.
The MCA may impose penalty of up to INR 1,00,000/- and INR 1,000 per day the default continues.
Such Significant Beneficial Owner can be charged with fraud under Section 447 of Companies Act, 2013.
Consequences of non-compliance by a company?
Fine ranging from INR 10,00,000/- to INR 50,00,000/- for company and INR 1,000 per day the default continues.
Who is exempted from definition of Significant Beneficial Owner?
Alternative Investment Funds (AIFs); and
Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (lnvlTs).