MCA has notified the amendments to the Companies (Significant Beneficial Ownership) Rules, 2018 dated 08.02.2019 vide Companies (Significant Beneficial Owners) Amendment Rules, 2019.
RULE- 2 : Meaning of Significant Beneficial Owner :
An individual who acting alone or together, or through one or more persons trust, possesses one OR more of the following rights or entitlements in such reporting company
1. Hold Minimum 10% of shares indirectly, or together with any direct holdings;
2. Hold Minimum 10% of voting rights in the shares indirectly, or together with any direct holdings;
3. Has right to receive or participate in Minimum 10% of the total distributable dividend, or any other distribution, in a financial year indirectly, or together with any direct holdings;
4. Has right to exercise, or actually exercises, significant influence* or control#, in any manner other than through direct holdings alone.
* The term control means right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner
# 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.
Note: If an individual does not hold any right or entitlement INDIRECTLY then he shall not be considered to be a significant beneficial owner.
- Conditions for DIRECTLY HOLDING in the reporting Entity
1. The shares in the reporting company representing such right or entitlement are held in the name of the individual; OR
2. The individual holds or acquires a beneficial interest in the share of the reporting company. A beneficial interest is the right to receive benefits on shares held by another Party.
- Conditions for INDIRECTLY HOLDING in the reporting Entity:
| Member of reporting Company | Conditions |
| Body Corporate whether incorporated or registered in India or abroad,[Except LLP] | the individual who holds:
(a) Majority Stake@ in that Member; or (b) Majority Stake in Ultimate Holding Company of that Member. |
| HUF | the individual is the Karta of HUF |
| Partnership entity | 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. |
| Trust | 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. |
| Pool Investment Vehicle / An entity controlled by the pooled investment vehicle which is member State of the Financial Action Task Force on Money Laundering and the regulator of the securities market | the individual,
(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. |
| Note: The instruments in the form of Global Depository Receipts (GDR), Compulsorily Convertible Preference Shares or Compulsorily Convertible Debentures shall be treated as ‘shares’. | |
@ “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
RULE-2A: Duty of the reporting company
1. Identify members who is an INDIVIDUAL who is a SBO and cause such individual to make a declaration in Form No. BEN-1
2. Identify members who is OTHER THAN INDIVIDUAL who is a SBO and send notice in Form BEN-4.
[Note: No time line prescribed in Rules for sending BEN-4 to members who is other than individuals, so that one can opine that Company has sent the same on or before 08/04/2019 as Format of BEN-4 clearly mentioned that the said SBO needs to give information within 30 days from the date of notice.]
RULE-3: Declaration of significant beneficial ownership
| Sr. No. | Particular | Due Date of Filling | Example |
| 1. | INITIAL Disclosure – Existing SBO as on date of Notification i.e. 08th February, 2019 | 08/05/2019 (Within 90 days from date of Notification i.e. 08th February, 2019) | — |
| 2. | INTERMEDIATE (between 90 days) – If a person becomes SBO or undergoes any changes within 90 days of date of commencement | Within 30 days from date of expiry of ninety days from the date of commencement of said rules | SBO comes into existence on 1st March, 2019, than 30 days will start from 08/05/2019 i.e. 06/06/2019 |
| 3. | CONTINUAL (after 90 days) | Within 30 days of acquiring SBO | SBO comes into existence on 11th May, 2019, than 30 days will start from 11/05/2019 i.e. 10/06/2019 |
RULE-4: Return of significant beneficial owners in shares
- File a return by reporting entity in Form BEN-2 within a period of thirty days from the date of receipt of such declaration
RULE-5: Register of significant beneficial owners
- Maintain register by reporting entity in Form BEN-3
- Open for inspection during business hours
RULE-7: Application to the Tribunal
- Reporting company shall apply within a 15 days of the expiry of the period specified in the notice to the tribunal if;
- Person fails to give the information required by the notice in Form No. BEN-4, within the time specified therein or given information is not satisfactory
- Directing that the shares in question be subject to restrictions, including –
1. Restrictions on the transfer of interest attached to the shares in question;
2. Suspension of the right to receive dividend or any other distribution in relation to the shares in question;
3. Suspension of voting rights in relation to the shares in question;
4. Any other restriction on all or any of the rights attached with the shares in question.
RULE-8: Non Applicability
These rules are not applicable to the extent the share of the reporting company is held by
1. IEPF Authority
2. Holding reporting entity of reporting company
[Note: Provided that the details of such holding reporting company shall be reported in Form No. BEN-2]
3. Central or State Government and Local Authority
4. Reporting company or Body corporate or an entity co., Controlled by CG/SG
5. Mutual funds, alternative investment funds (AIF), Real Estate Investment Trusts (REITs), Infrastructure Investment Trust (InVITs) and other Investment Vehicles regulated by the Securities and Exchange Board of India.
6. Investment Vehicles regulated by Reserve Bank of India, or Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority.
Author Bio
1. Is declaration in Form BEN-1 required from individuals holding 10%/above shares registered in individual name but not director in pvt. ltd. company.
2. Deadline of sending notice, if required to be sent by reporting company to such individual members who has not given any declaration so far.