The MCA has notified the Companies (Management and Administration) Second Amendment Rules, 2023 through a notification dated 27 October 2023.
Let’s delve into a simplified exploration of the latest amendments and grasp their implications in the business landscape.
Context
Rule 9 of the Companies (Management and Administration) Rules, 2014 deals with the Declaration in respect of beneficial interest in shares of the company.
Beneficial ownership essentially means that even if the legal title of the share is in the name of one person, the benefits of those shares (like dividends, etc.) are actually accruing to another person.
Section 89 of the Companies Act, 2013 talks about the declaration of beneficial interest in shares. It states that every individual who holds (or acquires) a beneficial interest in shares of a company should make a declaration of that fact to the company.
It requires that where any declaration is made by an individual in respect of shares under section 89 of the Companies Act, 2013, the company in which such shares are held should make a note of such declaration and keep the information in the Register of Members. The holder of such beneficial interest should also file a declaration with the company specifying the nature of his interest, particulars of the person in whose name the shares stand in the company’s books, and other details as may be necessary.
These provisions were introduced to bring transparency to such arrangements and make sure that the real beneficiaries are identified.
Amendments to Rule 9 of Companies (Management and Administration) Rules, 2014
Every company needs to appoint an authorized person who will be responsible for sharing information related to the beneficial interest in its shares with the government. This liaison plays a crucial role in maintaining transparency and ensuring regulatory compliance.
What is the duty of this Authorized Person?
The primary duty of this individual is to:
1. Furnish information to the government with respect to beneficial interest in shares of the company.
2. Collaborate and provide necessary details as required by the Registrar or any other official authorities.
Who can be appointed as authorized person?
- Company secretary – if there is a requirement of mandatory appointment of company secretary.
- Key managerial personnel (other than the company secretary).
- Director, if there is no company secretary or key managerial personnel.
Interim Authorization:
Until a formal appointment or authorization takes place, the aforementioned individuals are automatically considered authorized for the role.
Reporting to Regulators:
The company has a responsibility to mention the details of this authorized person in its Annual Return. Any changes in the designation or details of this authorized individual should promptly be communicated to the Registrar of Companies (ROC) using e-form GNL-2.
The requirement to appoint a designated person might be intended to make it easier for the Registrar and other authorized officers to obtain information about beneficial ownership. By having a single point of contact, the authorities can save time and resources.
These new requirements under companies rules are a positive step forward in terms of improving corporate governance and transparency in India Inc.
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