Companies (Significant Beneficial Owners) Amendment Rules, 2019- New Rule Analysis

As per New Rule, Reporting Company have to find out about the SBO, identify the individual and cause such individual to make a declaration to the Reporting Company in Form No. BEN-1 (Physical Form). This form shall be filed by the individual who is the SBO to the Reporting Company within 90 days from the commencement of these Rules (i.e., by 10th May, 2019) and for subsequent changes or acquiring the status of SBO, within 30days of such change or acquiring the SBO. Reporting company shall file a return in Form No. BEN-2 (E-form) to ROC Within a period of thirty days from the date of receipt of declaration by the company.

In order to find out about the SBO, the Company shall send Notice in Form No. BEN-4 to all its members(other than individuals) holding not less than 10% of the company’s shares/voting rights/right to receive/participate in the dividend or any other distribution payable in a financial year. The company shall maintain a Register of significant beneficial owners in the format as prescribed by central government in Form No. BEN-3.

Important terms

Majority Stake Means:-

(i) holding more than one-half of the equity share capital in the body corporate; or

(ii) holding more than one-half of the voting rights in the body corporate; or

(iii) having the right to receive or participate in more than one-half of the distributable dividend or any other distribution by the body corporate;

Significant Influence Means:-

“Significant influence” means the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company but is not control or joint control of those policies’.

 Significant beneficial owner Means:-

According to Rule 2(h) of SBO Amendment Rules, 2019, “significant beneficial owner, in relation to a reporting company means an individual referred to in sub-section (1) of section 90, who acting alone or together, or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting company, namely:

(i) holds indirectly, or together with any direct holdings, not less than ten per cent. of the shares;

(ii) holds indirectly, or together with any direct holdings, not less than ten per cent. of the voting rights in the shares;

(iii) has right to receive or participate in not less than ten per cent. of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings;

(iv) has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct-holdings alone.

Meaning of Directly – For the purpose of this clause, an individual shall be considered to hold a right or entitlement directly in the reporting company, if he satisfies any of the following criteria, namely:

(i) the shares in the reporting company representing such right or entitlement are held in the name of the individual;

(ii) the individual holds or acquires a beneficial interest in the share of the reporting company under sub_section (2) of section 89, and has made a declaration in this regard to the reporting company.

Meaning of Indirectly –  For the purpose of this clause, an individual shall be Considered to hold a right or entitlement indirectly if in the reporting company, he satisfies any of the following criteria, in respect of a member of the reporting company, namely: –

(i) where the member of the reporting company is a body corporate (whether Incorporated or registered in India or abroad), other than LLP and the individual,-

(a) holds majority stake in that member; or

(b) holds majority stake in the ultimate holding company (whether incorporated or registered in India or abroad) of that member;

FOR COMPANIES WHO HAS HUF AS SHAREHOLDERS 

THE SBO IS: The Karta of Such HUF.

FOR COMPANIES WHO HAS LLP AS SHAREHOLDERS

THE SBO IS: The Individual who:

  • 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 the partnership entity

Duty of Reporting Co

(1) Every reporting company shall take necessary steps to find out if there is any individual who is a significant beneficial owner, as defined in clause (h) of rule 2, 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) Without prejudice to the generality of the steps stated in sub-rule (1), every Reporting company shall in all cases where its member (other than an individual), holds not less than ten per cent. of its;-

(a) shares, or

(b) Voting rights

(c) right to receive or participate in the dividend or any other distribution payable in a financial year, give notice to such member, seeking information in accordance with subsection (5) of section 90, in Form No. BEN-4.

Declaration of Significant Beneficial Ownership: Rule 3 has been substituted to provide for the following :

(i) Every individual who is an SBO on the date of commencement of these Rules shall file a declaration in BEN-1 within 90 days of such commencement.

(ii) Every individual who subsequently becomes a SBO or his ownership undergoes a change, shall file such declaration to the reporting company within 30 days of acquiring such ownership or any change therein.

(iii) Where an individual becomes a SBO or there occurs a change in the significant beneficial ownership of a company within ninety days of the commencement of these Rules, it shall be deemed that the individual became a SBO or any change therein happened on the expiry of 90 days of the commencement of these Rules, and the 30 day period for filing will be considered accordingly.

Subsequent to the amendment, the reporting company can also make an application to the Tribunal in case any person fails to give the information required by the notice in Form No. BEN-4, within the time specified therein

NON-APPLICABILITY of the Rules-

to the extent the share of the reporting company is held by:

(a) the authority constituted under sub-section (5) of section 125 of the Act (IEPF);

(b) its holding reporting company:

Provided that details of such holding reporting company shall be reported in E-form BEN-2.

(c) the Central Government, State Government or any local Authority;

(d) (i) a reporting company, or (ii) a body corporate, or (iii) an entity, 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;

(e) 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 (lnVITs) regulated by the Securities and Exchange Board of India,

(f) lnvestment Vehicles regulated by Reserve Bank of India, or Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority.

Forms & Format & Due date

Form No. BEN-1 (Physical form)

Declaration by the beneficial owner who holds or acquires significant beneficial ownership in shares to Reporting Company. Ninety days from commencement date.

AND

within thirty days in case of any change in his significant beneficial ownership

Form No. BEN-1

Declaration by the beneficial owner who holds or acquires significant beneficial ownership in shares

[Pursuant to section 90(1) of the Companies Act, 2013 and rule 2A, 3]

To

Name of the company:

Registered office address:

1. Purpose of filing the form (choose any one)

O For declaration of Significant Beneficial Ownership under Section 90

O For Change in Significant Beneficial Ownership under Section 90

ID of the Significant Beneficial Owner

2. Particulars of the holder of the Significant Beneficial Ownership

Name of the Significant Beneficial Owner Given name and last Name)
Address and Email id
Date of Birth/Age
Father’s/ Mother’s/Spouse’s name
Occupation
Nationality
Passport  No. (in case of foreign national)

3. Nature of indirect holding or exercise of right in the reporting company through member of the reporting company (where more than one repeat this para of the Form)

(a) Type of Member (Company/ LLp/Any other Body Corporate/HUF/Partnership Firm/Discretionary Trust/ Charitable trust/specific Trust/Revocable Trust /Pooled Investment vehicle (PlV) / Entity controlled

(b) Corporate Identity number(ClN) or LLP Identification number(LLPIN) or any other registration number allotted by the regulator established under the Act

(c) Name of the Member

(d) Address

(e) Nature of indirect holding or exercise of right in the reporting company:

O By virtue of shares

O By virtue of voting rights in shares

O By virtue of rights on distributable dividend or any other distribution

O By virtue of exercise of control (attach copy of agreement)

O By virtue of exercise of significant influence (attach copy of agreement)

(f) status of significant beneficial owner in the member of the reporting company (choose any one)

O Individual in case of company or any other body corporate

O Partner in case of partnership firm or LLP

O Karta in case of HUF

O Trustee in case of a discretionary trust or charitable trust

O Beneficiary in case of a specific trust

O Author or settlor in case of a revocable trust

O General Partner, Investment Manager or CEO in case of pooled investment vehicle or entity controlled by pooled investment vehicle

(g) In case the member is a partnership firm or LLP, specify whether significant beneficial owner:

O is a partner

O holds majority stake in the body corporate partner

O holds majority stake in the ultimate holding company of the body corporate partner

(h) In case the member is a company or any other body corporate, specify whether significant beneficial owner holds:

O majority stake in such company or body corporate

O majority stake in the ultimate holding company of such company or body corporate

(i) whether significant Beneficial owner has any direct holding or right in the reporting company

O Yes

O No

If yes, enter details below:

O By virtue of shares

O By virtue of voting rights in shares

O By virtue of rights on distributable dividend or any other distribution

O By virtue of exercise of control (attach copy of agreement)

O By virtue of exercise of significant influence (attach copy of agreement)

Date:

Place:

Signature of the holder of the significant beneficial interest

Form no. BEN-4

Notice seeking information about significant beneficial owners:

Notice in Form No. BEN-4 given by the Reporting company to To the Member (other than an individual), who holds not less than ten per cent. of its;- (a) shares, or (b) Its voting rights, or (c) right to receive or participate in the dividend or any other distribution payable in a financial year.

IN CASE OF Failure of person to reply to the notice by the company in Form BEN 4:

As per sub section (7) of section 90:

THE REPORTING COMPANY SHALL –

  • Where the person fails to give notice GIVEN IN BEN – 4 within the specified time or,
  • Where the information given by that person is not satisfactory

APPLY TO TRIBUNAL WITHIN 15 DAYS FROM THE DATE OF EXPIRY OF PERIOD SPECIFIED IN THE NOTICE, FOR AN ORDER OF

  • Restrictions with regard to transfer of interest,
  • suspension of the right to receive dividend or any other distribution in relation to the shares in question
  • suspension of voting rights in relation to the shares in question;
  • any other restriction on all or any of the rights attached with the shares in question.

 —————–

Form no. BEN-4

(Pursuant to section 90(5) of the Companies Act, 2013, rule 2A, 6 and rule 7)

To:

Name and address of significant beneficial owner/any other person

Date:

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 a significant beneficial owner of the Company

*have knowledge of the identity of significant beneficial owner/another person

Likely to have such knowledge;

*being a member hold not less than 10% of the shares/voting rights/rights on Dividend or any other distribution in the company

*has been a significant beneficial owner of the company during the three years immediately preceding the date of this notice, and respect of the above significant beneficial ownership, the return prescribed under Section 90 of the Act has not been filed in compliance with the Act.

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-I.

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 above mentioned 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)

E-form BEN-2

Reporting company shall file a return in E-Form No. BEN-2 to ROC Within a period of thirty days from the date of receipt of declaration by the company.

In E-form following information required to fill:-

CIN, Name, Registered office, Email, Purpose of Form, No of member and particular of member.

Attachment:

Declaration u/s 90.

Form BEN3-

The company shall maintain a register of significant beneficial owners in the format as prescribed by central government always after the Commencement of these rules. The register shall be open for inspection during business hours, at such reasonable time of not less than two hours, on every working day as the board may decide, by any member of the company on payment of such fee as may be specified by the company but not exceeding fifty rupees for each inspection.

 Form no. BEN-3

Register of beneficial owners holding significant beneficial interest

(Pursuant to section 90(2) of the Companies Act, 2013 and rule 5(1))

Name of the company:

Registered office address:

Date of declaration under section 90

S.N
Name of the Beneficial Owner
Address and Email id
Date of Birth”
Father’s/
Mother’s/
Spouse’s name
Occupation
Nationality
PAN/ UIN
Passport No.
Status
Date of cessation
Date of entry in Register
Date of filing of BEN-2(
Any other interest,
Instructions, if any, given

Author Bio

Qualification: CS
Company: Ishrat Siddiqui & Associates
Location: Gurgaon, Haryana, IN
Member Since: 31 Jul 2018 | Total Posts: 6
Ishrat Siddiqui,(B.COM, ACS), PRACTICING COMPANY SECRETARY FROM GURGAON. She is Associate Member of The Institute of Company Secretaries of India. Her domain is in assignments related to Companies Act 2013, Secretarial Audit, FEMA,Taxation . etc View Full Profile

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One Comment

  1. SAHEB ALAM says:

    Maam,

    My query in this regard is that the member of the company (Reporting Co.) is a body corporate (holding 49% shares) and no individual are holding more than 10% in the body corporate.

    Whether the Body Corporate will be treated as SBO of the Reporting Co.?

    Kindly advice.
    Thanks in advance.

    Regards,
    Saheb Alam

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