In-depth Explanation of Section 90 of the Companies Act, 2013 — Register of Significant Beneficial Owners
Purpose of Section 90
Section 90 was introduced to enhance transparency in corporate ownership. It aims to identify the real or “beneficial” owners behind companies and LLPs, ensuring that ownership is not hidden through layers of intermediaries, shell entities, or trusts. This helps regulators, shareholders, banks, and enforcement agencies track who truly controls or benefits from a company’s activities.
The section is aligned with global standards, such as those recommended by the Financial Action Task Force (FATF), and forms part of India’s compliance framework to curb illicit finance and improve corporate governance.
Scope of Section 90
Section 90 applies to:
√ All companies (except certain private companies exempted by government notification)
√ LLPs, partnerships, and other entities in specific regulated sectors
√ Every person or entity that holds significant beneficial interest in shares, voting rights, dividends, or control
The obligation is not just to record shareholders but to identify and disclose the natural persons behind corporate structures.
Key Definitions
Significant Beneficial Owner (SBO):
A person who holds, directly or indirectly:
1.At least 10% of shares in the company
2. At least 10% of voting rights
3. The right to receive 10% or more of distributable dividends or other benefits
4. Significant influence or control, which includes:
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- Being able to appoint/remove directors
- Having contractual rights that affect decision-making
- Being in a position to influence the company’s policies
Indirect Control:
The provision covers ownership through multiple levels — for example, Person A holding shares in Entity X, which holds shares in Entity Y, which holds shares in the reporting company.
Register of Significant Beneficial Owners (SBO Register)
Section 90 requires companies to:
√ Identify all persons with beneficial ownership
√ Maintain a register of such persons at the registered office
√ Provide details such as name, address, date of birth, nationality, PAN (or equivalent ID), and nature of interest
The register must be made available for inspection by shareholders and statutory authorities, subject to reasonable procedures for protecting privacy.
Filing Requirement: BEN-2
Form BEN-2 is the official document through which companies:
√ Disclose details of each significant beneficial owner
√ Update ownership information in case of changes
√ Confirm compliance with Section 90 rules
Filing must be done within 30 days of identifying or updating the SBO information. Delay invites penalties under Section 90(4).
Interaction with Other Sections
1. Section 89 (Register of Members) — Focuses on shareholders’ direct ownership. Section 90 looks deeper, identifying who benefits beyond shareholders.
2. Section 117 (Filing Requirements) — Ensures BEN-2 details are submitted along with annual returns, enhancing cross-verification.
3. Section 90(4) (Penalty) — Imposes stringent penalties for false declarations or failure to maintain the register.
Exemptions and Government Notifications
The government has exempted certain private companies from these requirements where ownership is easily identifiable, and the risk of concealment is minimal. However, companies that are listed or part of regulated industries (banking, finance, etc.) are required to fully comply.
Challenges in Identifying Beneficial Owners
√ Complex ownership structures involving trusts, nominees, and layered investments
√ Use of joint holdings or proxies to obscure true ownership
√ Interpretation issues around “significant influence”
√ Lack of uniform reporting standards across jurisdictions
√ Fear of exposing personal or sensitive ownership data
Best Practices for Compliance
√ Conduct ownership audits periodically
√ Maintain updated shareholder and voting records
√ Use governance tools such as KYC (Know Your Customer) procedures
√ Provide training to directors, auditors, and compliance teams
√ Establish a standard operating procedure (SOP) for BEN-2 reporting
Penalties for Non-Compliance
Under Section 90(4):
√ A fine of ₹1,00,000 for failing to maintain or update the register
√ Additional fine of ₹5,000 for every day the default continues
√ Prosecution may be initiated for false reporting or fraudulent disclosures
Timely compliance ensures not only avoidance of penalties but also trust among stakeholders and regulatory bodies.
Why Section 90 Matters
- Enhances accountability and corporate governance
- Helps prevent financial crimes such as money laundering and tax evasion
- Aligns India with global corporate transparency norms
- Protects investors, lenders, and other stakeholders from undisclosed risks
For governance professionals, Section 90 represents both a compliance obligation and an opportunity to strengthen the integrity of corporate operations.
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