In order to get rid of various illegal activities like money laundering, benami transactions etc, Ministry, once again came up with new SBO (Amendment) Rules, 2019. In this write up, there is an overview of SBO Rules.

As per amended Rules, the term ‘Significant Beneficial Owner’ means any individual acting alone or together or through one or more persons or trust posses any of the following rights/entitlements  in a reporting Company:

  • Holding indirectly, or together with any direct holdings atleast 10% of the shares; or
  • Holding indirectly, or together with any direct holdings atleast 10% of the voting rights in the share; or
  • Having right to receive or participate in atleast 10% of the total distributable dividend or any other distribution; or
  • Having right to participate in the financial & operating policy decisions
NON APPLICABILITY OF THESE 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 2[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 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) investment Vehicles regulated by Reserve Bank of India, or Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority.] 

 RESPONSIBILITIES OF REPORTING COMPANY & SBO

As per amended rules, a Beneficial significant owner (SBO) as well as a reporting company are required  to comply with certain provisions.

Beneficial significant owner (SBO)

The Company shall apply to NCLT, if the required information is not furnished by the person.

Format of Form BEN-1, Form BEN-2, Form BEN-3 and Form BEN-4

Form No. BEN-1 Declaration by the beneficial owner who holds or acquires significant beneficial ownership in shares
Form No. BEN-2 Return to the Registrar in respect of declaration under section 90
Form No. BEN-3 Register of beneficial owners holding significant beneficial interest
Form No. BEN-4 Notice under sub-section (5) of Section 90 of the Companies Act, 2013 and rules made thereunder

PENAL PROVISIONS

Nature of Violation Penalty
If any person fails to make a declaration Shall be punishable with:

imprisonment for a term which may extend to one year ,

Or

fine which shall not be less than one lakh rupees but which may extend to ten lakh rupees,

Or

both

If a company fails to maintain register or denies inspection the company and every officer of the company who is in default shall be punishable with fine which shall not be less than ten lakh rupees but which may extend to fifty lakh rupees
If any person wilfully furnishes any false or incorrect information Penalised under section 447

 References:

Section 89/90 of CA, 2013

The Companies (Significant Beneficial Owner) Rules, 2019

The Companies (Significant Beneficial Owner) Second Amendment  Rules, 2019  

Ekta Maheshwari is the Author of this Article, she is a Company Secretary by Profession. The author can be reached at csektamaheshwari14@gmail.com.

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