In this editorial, Author shall discuss about concept of Beneficial Interest, meaning of beneficial owner, registered owner, compliances in case of beneficial interest etc.


He is a person, whose name shall be enter into register of members but who does not hold the beneficial interest in such shares, legal interest vested with the registered holders of the shares, who is also referred as the ‘registered or ostensible member’. he will be eligible for all the rights

  • Voting Right
  • Right issue offer
  • Proxy appointment, etc.

Compliance concept illustration. Idea of regulation and business


He is a person, who is actual owner of the shares. Registered owner is nominee on behalf of the beneficial owner. a beneficial interest vested with the beneficial owner.


A beneficial interest is the right to receive benefits on shares held by another party. Beneficial interest is often referred to in matters concerning trusts, whereby one has a vested interest in the trust’s assets. A beneficial interest is “that right which a person has in a contract made with another (third party).

Sub section 10 of Section 89 For the purposes of this section and section 90, beneficial interest in a share includes, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to—

(i) exercise or cause to be exercised any or all of the rights attached to such share; or

(ii) receive or participate in any dividend or other distribution in respect of such share.]



A registered owner required to make a declaration in MGT-4 with in 30 days of entry of his name in the registers of the Company.

  • Such declaration shall specify the name and other particulars of the person who holds the beneficial interest in such shares
  • The nature of the beneficial interest is also required to be specified in the said declaration


A beneficial owner required to make a declaration in MGT-5 with in 30 days after acquiring such beneficial interest in the shares of the company. Such declaration shall :-

  • specifying the nature of his interest,
  • particulars of the person in whose name the shares stand registered in the books of the company


There are two compliances required on the part of the company which receives the declaration from the holder of beneficial owner and registered member.

a) First to make entry in the register of members of the particulars contained in the declaration and

b) second to file a return in the prescribed format with the Registrar

the company shall file, within 30 days from the date of receipt of declaration by it, a return in form MGT-6 with the Registrar in respect of such declaration with such fees or additional fees as may be prescribed, within the time specified under section 403.


According to proviso to rule 9, inserted by the Companies (Management and Administration) Second Amendment Rules 2014, which came into force with effect from 24.07.2014, nothing contained in this rule shall apply in relation to

  • a trust which is created, to set up a Mutual Fund or Venture Capital Fund or such other fund as may be approved by SEBI.

It implies that these entities need not file the declarations as envisaged under the section.


Sub section 5 Section 89, If any person fails to make a declaration as required under sub-section (1) or sub-section (2) or sub-section (3), he shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of two hundred rupees for each day after the first during which such failure continues, subject to a maximum of five lakh rupees.

Sub section 7 Section 89, If a company, required to file a return under sub-section (6), fails to do so before the expiry of the time specified therein, the company and every officer of the company who is in default shall be liable to a penalty of one thousand rupees for each day during which such failure continues, subject to a maximum of five lakh rupees in the case of a company and two lakh rupees in case of an officer who is in default.

Quick Question:

A. Who is having right to get Dividend on such Shares?

Dividend shall be should be offered to the registered member. However, the registered member may direct the company to pay the dividend on his shares in favour of the beneficial owner.

B. Who is having right to get offer for Right Issue of Shares?

The rights share should be offered to the registered member. However, the registered member may renounce the rights shares in favour of the beneficial owner.

C. Who is having right to get offer for Bonus Shares?

In the case of bonus shares, the same shall be allotted in the name of the registered member and the same would have to be transferred to the beneficial owner, if so desired.


Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at

Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION

Author Bio

Qualification: CS
Company: Goyal Divesh & Associates
Location: Delhi, New Delhi, IN
Member Since: 04 Jun 2017 | Total Posts: 595
CS Divesh Goyal is Fellow Member of the Institute of Companies Secretaries and Practicing Company Secretary in Delhi and Steering Voice in the Corporate World. He is a competent professional having enrich post qualification experience of a decade with expertise in Corporate Law, FEMA, IBC, SEBI, View Full Profile

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February 2024