Significant Beneficial Owner under Companies Act, 2013

Section 90(1) of Companies Act, 2013– significant beneficial owner

Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India

• Holds beneficial interests, of not less than twenty-five per cent. or such other percentage as may be prescribed, in shares of a company
• or the right to exercise, or the actual exercising of significant influence or control as defined in clause (27) of section 2^*1, over the company.

RULE 2 (1) (e) The Companies (Significant Beneficial Owners) Rules, 2018

“significant beneficial owner” means an individual referred to in sub-section (1) of section 90 (holding ultimate beneficial interest of not less than ten per cent.) read with sub-section [10]of section 89, *²  but whose name is not entered in the register of members of a company as the holder of such shares, and the term ‘significant beneficial ownership’ shall be construed accordingly;

Explanation – For the purpose of this clause, the significant beneficial ownership, in case of persons other than individuals or natural persons, shall be determined as under-

(i) Where the member is a company, the significant beneficial owner

Is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trusts, holds not less than ten per cent share capital of the company or who exercises significant influence or control in the company through other means;

(ii) Where the member is a partnership firm, the significant beneficial owner

Is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trusts, holds not less than ten per cent of capital or has entitlement of not less than ten per cent. of profits of the partnership;

(iii) where no natural person is identified under (i) or (ii), the significant beneficial owner is the relevant natural person who holds the position of senior managing official;

(iv) Where the member is a trust through trustee, the identification of beneficial owner(s)

Shall include identification of the author of the trust, the trustee, the beneficiaries with not less than ten per cent. interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership;

Explanation It is hereby clarified that instruments in the {form of global depository receipts, compulsorily convertible preference shares or compulsorily convertible debentures shall be treated as ‘shares’ for the purpose of this clause;

For the purposes of this section (i.e. Sec 89) 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.]

Compliances to be met by significant beneficial owner

u/s 90(1)

• Every significant beneficial owner shall make a declaration to the company, specifying the nature of his interest and other particulars, in such manner and within such period of acquisition of the beneficial interest or rights and any change thereof, as may be prescribed
• RULE 3 (Declaration) The Companies (Significant Beneficial Owners) Rules, 2018
• (1) Every significant beneficial owner shall file
• a declaration in Form No. BEN-1 to the company in which he holds the significant beneficial ownership on the date of commencement of these rules within ninety days from such commencement
• And within thirty days in case of any change in his significant beneficial ownership.
• (2) Every individual, who, after the commencement of these rules, acquires significant beneficial ownershin in a company.
• shall file a declaration in Form No. BEN-I to the company, within thirty days of acquiring such significant beneficial ownership or in case of any change in such ownership.

Compliances to be met by company in respect of significant beneficial owner

Sec 90 (2)

Every company shall maintain a register of the interest declared by individuals under sub-section (1) and changes therein which shall include the name of individual, his date of birth, address, details of ownership in the company and such other details as may be prescribed:

Rule 5 (Register) The Companies (Significant Beneficial Owners) Rules, 2018

(1) The company shall maintain a register of significant beneficial owners in Form No. BEN-3.

(2) The register shall be open for inspection during business hours, at such reasonable time of not less than two hours, on every working day as the board may decide, by any member of the company on payment of such fee as may be specified by the company but not exceeding fifty rupees for each inspection.

Sec 90 (4)

Every company shall file a return of significant beneficial owners of the company and changes therein with the Registrar containing names, addresses and other details as may be prescribed within such time, in such form and manner as may be prescribed.

Rule 4 (Return) the Companies (Significant Beneficial Owners) Rules, 2018

Where any declaration under rule 3 is received by the company, it shall file a return in Form No. BEN-2 with the Registrar in respect of such declaration, within a period of thirty days from the date of receipt of declaration by it, along with the fees as prescribed in companies (Registration offices and fees) Rules, 2014.

OTHER IMPORTANT PROVISIONS

Rule 8 of the Companies (Significant Beneficial Owners) Rules, 2018

Non-Applicability

These rules are not made applicable to the holding of shares of companies/body corporates, in case of pooled investment vehicles/investment funds such as Mutual Funds, Alterative Investment Funds (AIFs), Real Estate Investment Trusts(REITs) and Infrastructure Investment Trusts regulated under SEBI Act.

*Further Sec 90 shall not be applicable to Government Company

*¹ SEC 2 (27) “control” shall include the 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;

*² SEC 89 (10)