Analysis of Companies (Significant Beneficial Owners) Rules

The Companies (Significant Beneficial Owners) Rules, 2018 read with the Companies (Significant Beneficial Owners) Amendment Rules, 2019.

RULE NO. 2.

Significant Beneficial Owner, in relation to a Reporting Company MEANS an INDIVIDUAL referred to in section 90(1) , 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:-

NOTES:

*SHARES include Global Depository Receipts (GDR), Compulsorily Convertible Preference Shares (CCPS) or Compulsorily Convertible Debentures (CCD).

**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.

Explanation No.1:-

An INDIVIDUAL holds any Right or Entitlement  DIRECTLY under above mentioned point (1), (2) or (3), he shall NOT be considered to be a Significant Beneficial Owner.

Explanation No.2:-

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 section 89(2), and has made a declaration in this regard to the reporting company in Form MGT-5.

Explanation No.3:-

An INDIVIDUAL shall be considered to hold a Right or Entitlement INDIRECTLY in the reporting company, if he satisfies any of the following CLAUSES , in respect of a MEMBER of the REPORTING COMPANY, namely:-

1. BODY CORPORATE (WHETHER INCORPORATED OR REGISTERED IN INDIA OR ABROAD)

• 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;

2. HINDU UNDIVIDED FAMILY (HUF) (THROUGH KARTA)

• The INDIVIDUAL is the KARTA of the HUF.

3. PARTNERSHIP ENTITY (THROUGH ITSELF OR A PARTNER)

Note: A Partnership firm can be member in Section 8 Company Only.

• The INDIVIDUAL,-
• (a) is a partner; or
• (b) holds majority stake in the body corporate which is a partner of the partnership entity; or
• (c) holds majority stake in the ultimate holding company of the body corporate which is a partner of the partnership entity.

4. TRUST (THROUGH TRUSTEE)

• The INDIVIDUAL,-
• (a) is a TRUSTEE in case of a Discretionary Trust or a Charitable Trust;
• (b) is a BENEFICIARY in case of a Specific Trust;
• (c) is the AUTHOR or SETTLOR in case of a Revocable Trust.

5. (a) a POOLED INVESTMENT VEHICLE (i.e Mutual Fund, Venture Captital Fund, etc.) ; or

(b) an ENTITY CONTROLLED BY THE POOLED INVESTMENT VEHICLE,

based in member State of the FATF on Money Laundering and the regulator of the securities market in such
member State is a member of the IOSCO.

• The INDIVIDUAL in relation to the Pooled Investment Vehicle,-
• (a) is a General Partner; or
• (b) is an Investment Manager; or
• (c) is a Chief Executive Officer where the Investment Manager of such pooled vehicle is a Body Corporate or a Partnership Entity.

Explanation No.4:-

Where the MEMBER of a Reporting Company is,

(i) a Pooled Investment Vehicle; or

(ii) an Entity controlled by the Pooled Investment Vehicle,

based in a jurisdiction which does Not Fulfill The Requirements referred to in clause (5) of Explanation 3, the provisions of clause (1) or clause (2) or clause (3) or clause (4) of Explanation 3, as the case may be, SHALL APPLY.

NOTE:

* Majority Stake means;-

(i) holding more than (50%) one-half of the Equity Share Capital in the Body Corporate; or

(ii) holding more than (50%) one-half of the Voting Rights in the Body Corporate; or

(iii) having the right to receive or participate in more than (50%) one-half of the Distributable Dividend or Any Other Distribution by the Body Corporate;

RULE NO. 2A.

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, 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 At least 10% of its;-

(a) Shares, or

(b) Voting rights, or

(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.

RULE NO. 3.

Declaration of Significant Beneficial Ownership BY SBO in Form BEN-1 Under Section 90

1. Every INDIVIDUAL who is a Significant Beneficial Owner (SBO) in a Reporting Company, shall file a DECLARATION in Form No. BEN-1 to the reporting company within 90 days from such commencement (i.e. 08.02.2019).

2. Every INDIVIDUAL, who SUBSEQUENTLY becomes a Significant Beneficial Owner (SBO) ,or where his Significant Beneficial Ownership undergoes any change shall file a declaration in Form No. BEN-1 to the Reporting Company, within 30 days of Acquiring such significant beneficial ownership or any change therein.

Explanation.- Where an individual becomes a significant beneficial owner, or where his significant beneficial ownership undergoes any change, within 90 days of the commencement of the Companies (Significant Beneficial Owners) Amendment Rules, 2019, it shall be deemed that such individual became the significant beneficial owner or any change therein happened on the date of expiry of 90 days from the date of commencement of said rules, and the period of 30 days for filing will be reckoned accordingly.

RULE NO. 4.

Return of Significant Beneficial Owners (SBOs) In Shares
By The Reporting Company in FORM BEN-2

Upon receipt of Declaration under rule 3, The Reporting Company shall file a Return in Form No. BEN-2 with the Registrar (ROC) in respect of such declaration, within a period of 30 days from the date of Receipt of Such Declaration by it, along with the fees as prescribed in Companies (Registration offices and fees) Rules, 2014.

RULE NO. 5.

Register of Significant Beneficial Owners (Form BEN-3)

1) The Company shall maintain a Register of Significant Beneficial Owners in Form No. BEN-3.

2) 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.

RULE NO. 6.

Notice seeking information about Significant Beneficial Owners

A company shall give notice seeking information in accordance with under subsection (5) of section 90, in Form No. BEN-4.

RULE NO. 7.

Application to the Tribunal (NCLT)

The Reporting Company shall apply to the Tribunal (NCLT),

(i) Where any person fails to give the information required by the NOTICE in Form No. BEN-4, within the time specified therein; or

(ii) Where the information given is NOT satisfactory, in accordance with section 90(7), for order directing that the shares in question be subject to restrictions, including

(a) Restrictions on the transfer of interest attached to the shares in question;

(b) Suspension of the right to receive dividend or any other distribution in relation to the shares in question;

(c) Suspension of voting rights in relation to the shares in question;

(d) Any other restriction on all or any of the rights attached with the shares in question.

RULE NO. 8.

Non-Applicability of the SBO Rules

These rules shall Not be made applicable 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.

(b) its Holding Reporting Company:

Provided that the Details of such holding reporting company shall be reported in Form No. 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 (SEBI) 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 (RBI), or Insurance Regulatory and Development Authority of India (IRDA), or Pension Fund Regulatory and Development Authority (PFRDA).