Amendment to Section 89 and 90 is one of the key amendments brought in by the Companies (Amendment) Act, 2017 (‘Amendment Act’).
On June 14, 2018, MCA vide its Notification, has enforced the provisions of amended Section 90 of the Companies Act, 2013 and also issued the Companies (Beneficial Interest and Significant Beneficial Interest) Rules, 2018 in relation to the determination of SBO.
Thereafter, considering various practical difficulties in implementing the provisions of these Rules, MCA on February 8, 2019 has notified the revised rules in order to facilitate better implementation of the provisions.
HIGHLIGHTS OF THE AMENDMENT RULES
Significant Beneficial Owner
1. A person is considered as a Significant Beneficial Owner, if he/she, whether acting alone, together or through one or more individuals or trust holds a beneficial interest of at least 10% (previously 25% was prescribed). The beneficial interest could be in the form of a company’s shares or the right to exercise significant influence or control over the company.
2. These individuals must make a declaration to the company specifying the nature of his/her interest and other essential particulars in the prescribed manner and within the permitted time frame.
3. The Amended SBO Rules provide that a Significant Beneficial Owner is an individual (as specified above), who:
4. The Amended Rules have laid out the criteria on the rights or entitlements of direct holding in the Reporting Company based on the legal structure of the member. Here’s an overview of it:
|Member Structure||Individual Holding Right or Entitlement|
|Body Corporate (whether registered in India or abroad)||♣ Individuals holding a majority stake in that member
♣ Individuals holding a stake in the ultimate holding company of such member
Note – The Amendment Rules has identified one or more of the following as a Majority Stake:
1. Holding more than one-half of the equity share capital in the body corporate.
2. Holding more than one-half of the voting rights in the body corporate.
3. Having the right to receive or participate in more than one-half of the distributable dividend or any other distribution by the body corporate.
|Hindu Undivided Family (HUF) through Karta||Karta|
Meaning of Certain Important Terms:
1. MAJORITY STAKE: This term has been newly inserted in the revised Rules, which has been defined to mean
2. PERSON ACTING TOGETHER: The erstwhile rules did not specify the meaning of this phrase and hence, the same was left for different interpretations. In this regard, the revised Rules prescribes the meaning of the phrase, as per which:
If any individual, or individuals acting through any person or trust, act with a:
over a reporting company, pursuant to an agreement or understanding, formal or informal, such individual, or individuals, acting through any person or trust, as the case may be, shall be deemed to be ‘acting together’.
3. SHARES: As per the revised Rules, apart from the equity shares, the instruments in the form of global depository receipts, compulsorily convertible preference shares or compulsorily convertible debentures shall also be treated as ‘shares’.
Non-applicability of Rules:
The non-applicability net has been made clearer and more specific and wider considering the difficulties in determining the SBO in various situations. Now after the 2019 amendment, the SBO Rules shall not be made applicable to the extent the share of the reporting company is held by-
1. the authority constituted under sub-section (5) of section 125 of the Act;
2. its holding reporting company: Provided that the details of such holding reporting company shall be reported in Form No. BEN-2.
3. the Central Government, State Government or any local Authority;
4. the following controlled by the Central Government or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments;
5. Securities and Exchange Board of India registered Investment Vehicles such as mutual funds, alternative investment funds (AIF), Real Estate Investment Trusts (REITs), Infrastructure Investment Trust (InVITs) regulated by SEBI; and
6. Investment Vehicles regulated by RBI, or IRDA, or Pension Fund Regulatory and Development Authority.
Duty of the Reporting Company:
1. Every reporting company shall take necessary steps to find out if there is any individual who is a significant beneficial owner in relation to that reporting company, and if so, identify him and cause such individual to make a declaration in Form No. BEN-1.
2. Every reporting Company shall give notice to the members (other than an individual) holds not less than 10 % of its shares, voting rights, right to receive or participate in the dividend or any other distribution payable in a financial year, seeking information u/s 90 (5) in Form BEN-4.
Due Date of Filing the Form:
|One Time Filing under SBO Rules|
|Form BEN-1||90 days from the date of notification in official gazette viz. on or before May 8, 2019||Ever Individual who is a significant beneficial owner needs to file Form BEN -1 as per revised format to the Reporting Company.|
|e-Form BEN-2||30 days from receipt of BEN-1 by the Company||Upon receipt of declaration by the Company in Form BEN-1, the Company is required to file e-Form BEN-2 with ROC.|
|Form BEN-1||30 days on subsequently becoming Significant Beneficial Owners *||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 reporting company, within thirty days of acquiring such significant beneficial ownership or any change therein.|
|eForm BEN-2||30 days from receipt of BEN-1 by the Company||Upon receipt of declaration by the Company in form BEN-1, the Company is required to file eForm BEN-2 with ROC.|
* Note: In case of change in interest within 90 days of notification of the Rules, period of 30 days will commence from the expiry of above mentioned 90 days period.
Application to the Tribunal:
Company shall apply to the National Company Law Tribunal (NCLT) within 15 days from the date of expiry of period specified in the notice:
In case the significant beneficial owner fails to give the information required by the notice in Form No. BEN-4 given information are not satisfactory, for directing that the shares in question be subject to restrictions, including:
Penalties for Non-compliance:
BASIC INFORMATION ABOUT THE FORMS:
|Form under SBO Rules||Purpose and Details|
|Form BEN 1||Declaration by the beneficial owner who holds or acquires significant beneficial ownership in shares|
|E-Form BEN 2||Return to the Registrar in respect of declaration under Section 90|
|Form BEN 3||Register of beneficial owners holding significant beneficial interest|
|Form BEN 4||Notice seeking information about significant beneficial owners|
1. This is basically a register which needs to be maintained by the reporting company which will provide information of beneficial owners holding significant beneficial interest.
2. The following details need to be maintained:
1. This form prescribes the format of the notice which a reporting company is required to send to an individual which it has reasonable cause to believe is a significant beneficial owner.
2. The reporting company also needs to attach a copy of Form BEN-1.
3. Please see below the format of the notice.
Name and address of significant beneficial owner/any other person
Subject: Notice under sub-section (5) of Section 90 of the Companies Act, 2013 and rules made thereunder
The Company has reasonable cause to believe that:
You are accordingly advised to give the following information within 30 days of the date of this notice in accordance with the section 90 of the Companies Act, 2013:
1. Name and Address of the Beneficial Owner
2. PAN of the B.O
3. Name of the person/entity/trust/body etc in whose name the shares/rights are registered/held
4. Date of acquiring beneficial interest
5. Documents, terms and conditions or any other particulars regarding the BO ownership
6. Reason for not filing declaration in Form No. BEN-1.
7. Any other information incidental to or relevant or in your possession or knowledge to enable the company to evaluate this matter.
A copy of Form No. BEN-1 is attached for compliance.
The abovementioned particulars should be submitted in writing to the registered address of the company not later than 30 days of the date of this notice failing which the company shall proceed in the matter without further notice as per the provisions of the Act.
Name & signature
(Person authorized to issue notice)