SIGNIFICANT BENEFICIAL OWNERSHIP RULES, 2019

WHO ISASIGNIFICANT BENEFICIAL OWNER (SBO)?

Means an individual as per Sec 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:

  • holds indirectly, or together with any direct holdings, not less than ten per cent of the shares
  • holds indirectly, or together with any direct holdings, not less than ten per cent of the voting rights in the shares
  • 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
  • has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct-holdings alone

MEANING OF MAJORITY STAKE

  • holds > one-half of the equity share capital in the body corporate
  • holds > one-half of voting rights in the body corporate
  • right to receive or participate > one-half of the distributable dividend or any other distribution by the body corporate

MEANING OF PERSON ACTING TOGETHER

If any individual(s) :

  • acting through any person or trust
  • act with common intent or purpose of exercising any rights or entitlements
  • exercising control or significant influence over a reporting company pursuant to an agreement or understanding
  • formal or informal
  • such individual(s) acting through person or trust shall be deemed to be acting together.

MEANING OF SIGNIFICANT INFLUENCE

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.

MEANING OF DIRECT HOLDING BY SBO

On satisfaction of any one of the criteria:

  • An individual who hold shares in the reporting company representing such right or entitlement in the name of the individual.
  • An individual holds or acquires beneficial interest in the share of the reporting company and has made a declaration in this regard to the reporting company

MEANING OF INDIRECT HOLDING BY SBO

If the individual satisfies any of the following criteria in respect of a member of the reporting company:

PARTICULARS INDIVIDUAL HOLDING
WHERE THE MEMBER OF THE COMPANY IS A BODY CORPORATE (whether incorporated/registered in India or abroad) [other than LLPs] An individual who holds:

> Majority Stake in that Member; or

> Majority Stake in Ultimate Holding Company (whether incorporated/registered in India or abroad) of that Member is said to indirectly hold the right or entitlement in that company.

WHERE THE MEMBER OF THE COMPANY IS A HUF (through Karta) an individual who is the Karta of the HUF shall be said to indirectly hold the right or entitlement in that company.
WHERE THE MEMBER OF THE COMPANY IS A PARTNERSHIP ENTITY [LLPs are covered](through itself or partner)  an individual who:

> is a partner of that partnership entity; or

> holds majority stake in the body corporate which is a partner of the partnership entity; or

> holds majority stake in the ultimate holding company of the body corporate which is a partner of the partnership entity.

is said to indirectly hold the right or entitlement in that company.

WHERE THE MEMBER OF THE COMPANY IS A TRUST (through trustee) an individual who is:

> a trustee, in case of a discretionary trust or a charitable trust

> a beneficiary in case of a specific trust

> the author or settler, in case of a revocable trust.

is said to indirectly hold the right or entitlement in that company

WHERE THE MEMBER OF THE COMPANY IS A POOLED INVESTMENT VEHICLE/ENTITY CONTROLLED BY POOLED INVESTMENT VEHICLE, based in member State of the Financial Action Task Force on Money Laundering and the regulator of the securities market in such member State is a member of the International Organization of Securities Commissions the individual who is:

> a general partner of the pooled investment vehicle; or

> an investment manager of the pooled investment vehicle; or

> Chief Executive Officer (CEO), where the investment manager of such pooled vehicle is a body corporate or a partnership entity.

  • It is the duty of the reporting company to identify the individual who is the significant beneficial owner in relation to that reporting company and cause such individual to make a declaration in Form BEN-1.
  • Where the member is other than individual holding not less than 10% of its shares or voting rights or right to receive or participate in the dividend or any other distribution payable in a financial year, the reporting company shall give notice to the member for information in form BEN-4.

DUE DATE FOR FILING

Form Particulars Due Date
BEN-1 Individual who is SBO to the reporting company Within 90 days from commencement of SBO rules. Within 30 days of subsequently acquiring the significant beneficial ownership or any change therein.
BEN-2 Reporting Company to Registrar Within 30 days of receipt of declaration in BEN-1
BEN-3 Register of beneficial owners holding significant beneficial interest
BEN-4 Notice by reporting company to member* for information as per 90(5)

*Member (other than individual) holding not less than 10% shares or voting rights or right to receive/participate in dividend or any other distribution payable in a financial year.

Where an individual becomes SBO or any change occurs in ownership within 90 days of commencement of these rules, it shall be deemed that the change has occurred or individual has become SBO on the expiry of the 90 days from the commencement of these rules and 30 days shall be calculated accordingly.

NON-APPLICABILITY

  • Authority under 125(5) of Companies Act: Investor and Protection Fund.
  • Holding reporting company of the reporting company (provided details of the holding reporting company shall be reported in form BEN-2)
  • The Central Government, State Government or any local authority.
  • Entity, reporting company, body corporate controlled by the Central or State Government or partly by Central Government or partly by one or more State Governments.
  • Investment Vehicles regulated by IRDA or RBI or Pension Fund Regulatory and Development Authority
  • Investment Vehicles registered with SEBI

Author Bio

Qualification: CS
Company: N/A
Location: West Bengal, IN
Member Since: 29 Sep 2018 | Total Posts: 1

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5 Comments

  1. Rajnikant Maurya says:

    What Will be Impact in Financial term,Whether it will be Treated as related party and the Disclosure of the same is required to give in financial statement

  2. Nishant agrawal says:

    If they are person acting alone then no need to report as they are not an sbo …but if they are person acting together then you have to report in ben2

    1. Sumedha says:

      Thnx for reply.
      All 4 are family members related to each other. Even X1 and X2 are brothers having direct holding of 10% each in Reporting company i.e.A Pvt. Ltd. Both have direct holding as well as indirect holding.

      1. Reshma Iyer says:

        For direct holding SBO rules will not apply. In case indirect and direct holding together is more than the prescribed limit SBO rules will apply

  3. Sumedha says:

    B pvt.ltd. has 80% sharehoding in A pvt. ltd. and B pvt. ltd. has 4 shareholders ( X1, X2, X3 and X4) having 30%, 30%, 20% and 20% shareholding respectively. None of the shareholders is having majority stake in B pvt. Ltd. Do they all be considered as Significant Beneficial owners of A pvt. ltd. through their indirect holding? Please explain.

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