As per the Rule 8(b) of Companies (Significant Beneficial Ownership) Rules, 2018 [‘Companies SBO rules’][1], if the holding company of the reporting company files form BEN-2 by attaching BEN-1, then the reporting company can simply mention the CIN of the holding reporting company and file the BEN-2 (i.e., it is not mandatory for the significant beneficial owner to give BEN-1 to each of the subsidiaries.
Introduction
Now vide notification dt November 09, 2023[2] Ministry of Corporate Affairs (‘MCA’) have notified Limited Liability Partnership (Significant Beneficial Ownership) Rules, 2023 for identification of Significant Beneficial Owner [‘SBO’] in Limited Liability Partnerships [‘LLPs’]. So now concerned LLPs must file form LLP BEN-2 stating who is the SBO holding majority interest in the LLP. In this article we shall deal with a situation with respect to filing of LLP BEN 2 when a company is a member of LLP holding majority interest?
First let’s understand the above referred situation with the help of an example:
- A Pvt Ltd is holding company of B Pvt Ltd and B Pvt Ltd is holding company of C Pvt Ltd, and there is one individual Mr. X who is majority stakeholder in A Pvt Ltd. So, Mr. X is the SBO of all these companies in hierarchy. [i.e. B Pvt Ltd and C Pvt Ltd]
- X had given BEN-1 to B Pvt Ltd and B Pvt Ltd filed e-form BEN-2 by attaching the BEN-1 received from Mr. X. As B Pvt Ltd had filed form BEN-2 then C Pvt Ltd filed BEN-2 just by mentioning the CIN of B Pvt Ltd as its holding reporting company, without having received any BEN-1 from Mr. X.
- Now if C Pvt Ltd (i.e., subsidiary in the lower level of hierarchy) is a partner in ABC LLP holding more than 50% contribution, then can ABC LLP also give reference of the CIN of B Pvt Ltd as holding reporting company and file LLP BEN-2 OR whether Mr. X needs to give a separate LLP BEN-1 to this LLP?
If we refer to rule 10 of LLP SBO rules[3] which also talks about non-applicability, it does not provide any such exemption pertaining to holding reporting entity, probably because, unlike companies act, there is no concept of holding LLP in LLP Act 2008. Therefore, in the example given above, if B Pvt ltd holds more than 50% contribution in any LLP, then Mr. X will have to give declaration to such LLP in form LLP BEN-1. Hence accordingly Mr. X will have to give separate declaration under LLP BEN-1 to ABC LLP for filing of LLP BEN-2.
What if one LLP holds majority interest in another LLP?
If BCD LLP holds 60% interest in FLD LLP and BCD LLP has already filed form BEN-2 then can FLD LLP simply mention SRN of LLP BEN-2 filed by BCD LLP?
There is some uncertainty with respect to filing of form LLP BEN-2 in case one LLP holds majority interest in another LLP. Even though the LLP Act does not define the concept of holding LLP neither LLP SBO rules do provide any exemption to holding LLP, yet the form BEN-2 provides in its purpose point NO 3, an option for declaration of holding reporting LLP.
Now, the point worth noting is that, even when there is no concept of holding LLP under LLP Act, 2008 then can form LLP BEN-2 provide for the same?
Filing of form LLP BEN-2 in such situations is tricky. As such points are very crucial while reporting about SBO, reporting LLPs are required to be extremely cautious in this regard. Consulting a professional expert is advisable so that further complications may be avoided.
[1] These rules shall not be applicable to the extent of share of reporting company is held by holding reporting company provided the details of such holding reporting company shall be reported in form BEN-2
[2] https://taxguru.in/corporate-law/limited-liability-partnership-significant-beneficial-owners-rules-2023.html#google_vignette
[3] These rules shall not apply to the extent the contribution of the reporting limited liability partnership is held by.-
(a) the Central Government, State Government or any local authority;
(b) (i) a reporting limited liability partnership, or (ii) a body corporate, or (iii) an entity, controlled by the Central Government or by one or more State Government, or partly by the Central Government and partly by one or more State Government;
(c) an investment vehicles registered with, and regulated by the Securities and Exchange Board of India, such as mutual funds, alternative investment funds (AIF), Real Estate Investment Trusts (REITs), Infrastructure Investment Trust (lnVITs).
(d) an investment vehicles regulated by the Reserve Bank of India, or the Insurance Regulatory and Development Authority of India, or the Pension Fund Regulatory and Development Authority.
The filing requirements for BEN-2 and LLP BEN-2 present specific challenges, especially when dealing with hierarchical structures and multiple ownership levels. While the Companies Act provides certain exemptions, the LLP Act does not recognize the concept of a holding LLP, complicating the filing process. Therefore, it is crucial for reporting LLPs to exercise caution and seek professional guidance to ensure compliance and avoid potential complications when identifying and reporting significant beneficial owners.
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The article is written by Mr. Vallabh Joshi – Senior Manager – vallabhjoshi@mmjc.in.
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