The Ministry of Corporate Affairs notified Companies (Significant Beneficial Ownership) Amendment Rules 2019, to amend the Significant Beneficial Ownership Rules 2018 notified last June. The Rules aim to look-through corporate layers to reveal individual shareholders that ultimately derive economic benefits from and/or control a corporate entity in India. The amendment introduces Rule 2(h) which seeks to substitute the present definition of ‘significant beneficial owner’ as:
“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:
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.’
The amended definition covers individuals holding a right or entitlement indirectly through HUF, body corporate, partnership entities and trusts, which are members in the reporting company.
Explanation: Where the member of the reporting company is a body corporate (whether incorporated or registered in India or abroad), other than a Limited liability partnership, 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;
The amendment extends the application of Rules to holding of shares in instances of pooled investment vehicles.
As per new Rule 2(i), “significant influence” is defined as 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’
The new Rule 2A states that every reporting company shall take necessary steps to find out if there is any individual who is a significant beneficial owner as defined in the Rules, and make such individuals to file declaration. Also, the company shall serve notice to all members(other than individuals) of a company which if they are holding not less than ten percent of shares or voting rights or right to receive or participate in dividend or any distribution payable in a financial year, seeking information in accordance with Section 90(5) in Form No. BEN-4.
Every significant beneficial owner of a company has to file declaration to that effect within 90 days of commencement of the amendment rules in Form No. BEN-1.
Upon receipt of declaration under rule 3, the reporting company shall file a return in Form No. BEN-2 with Registrar in respect of such declaration, within period of thirty days from the date of receipt of such declaration.
As per the substitution sought to be made to Rule 7, in case the significant beneficial owner fails to give satisfactory information in accordance with Section 90(7), the company can apply to the National Company Law Tribunal for directing that the shares in question be subject to restrictions, including –
Find below link of MCA notification for your ready reference.