Company Law

Significant Beneficial Owners [‘SBO’] [Ss. 89, 90, Co (SBO) Rules]

1.

Beneficial interest [S. 89(10)]

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:

  • exercise or cause to be exercised any or all of the rights attached to such share; or
  • receive or participate in any dividend or other distribution in respect of such share

2.

Significant beneficial owner

[R. 2(1)(h)]

in relation to a reporting Co means -

  • an individual referred to in S. 90(1) (holding ultimate beneficial interest of not < 10%) who acting alone or 19 together or through one or more persons or trust, possesses one or more of the following entitlements in such reporting Co, namely:-

(i) holds indirectly, or together with any direct holdings➔

not < 10% of the shares

(ii) holds indirectly, or together with any direct holdings➔

not < 10% of the voting rights in the shares

(iii) Has right to receive or participate ➔

In not < 10% of the total distributable dividend, or any other distribution, in a FY through indirect holdings alone, or together with any direct holdings

(iv) Has right to exercise, or actually exercises➔

20Significant influence or control in any manner other than through direct holdings alone

[Expl. I] If an individual does not hold any right or entitlement indirectly under (i), (ii) or (iii) above ➔ he shall not be considered to be a SBO

[Expl. II] An individual considered to hold any right or entitlement directly in a reporting Co ➔ If he satisfies any of the following conditions:

  1. The shares of the reporting Co representing such right or entitlement are held in the name of an individual;
  2. The individual holds or acquires a beneficial interest in the share of the reporting Co u/s 89(2), and has made a declaration in this regard to the reporting Co

[Expl. III] An individual considered to hold any right or entitlement indirectly in a reporting Co ➔ if he satisfies any of the following criteria

Where member of the reporting Co is ↓

Criteria ↓

a body corporate (whether registered in India or abroad) other than LLP,

And the individual➔
  1. Holds 21 majority stake in that member; OR
  2. Holds 21majority stake in the Ultimate Holding Company(whether registered in India or abroad) of that member
   

A HUF (through karta)

And the individual ➔

Is the karta of the HUF

a 22partnership entity (whether registered in India or abroad) other than LLP,

And the individual ➔
  1. Is a partner; or
  2. Holds 21majority stake in the body corporate which is a partner of the 22partnership entity; or
  3. Holds 21 majority stake in the Ultimate Holding Company of the body corporate which is a partner of the 22partnership entity

Is a trust (through trustee)

And the individual ➔
  1. Is a trustee in case of a discretionarytrust or a charitable trust;
  2. Is a beneficiary in case of a specifictrust;
  3. Is the author or settler in case of a revocable trust

Is (i) a pooled investment vehicle or (ii) an entity controlled by it

  
  • Based in member state of the Financial Action Task Force on Money Laundering and the regulator of the securities market in such member state is a member of International Organization of Securities Commissions,

And the individual in relation to the pooled investment vehicle ➔
  1. Is a general partner; or
  2. Is an investment manager; or
  3. Is a CEO where the investment manager of such a pooled investment vehicle is a body corporate or a 22partnership entity
  • Other than above

The relevant provisions mentioned above in this table shall apply

GDRs, CCPS, CCDs treated as ‘shares’ for this purpose

3.

Duty of the Reporting Co

[R. 2A]
  • take necessary steps to find out if there is any individual who is SBO ➔ identify him and cause him to make a declaration in Form No. BEN-1
  • in case a non-individual member holds ≥ 10% of shares/voting rights/right to receive or participate in the dividend or any other distribution payable in a FY ➔&nbnbsp;give notice to such member, seeking information in Form No. BEN-4

4.

Compliances 
[S. 90(1), (2), (3),(4) & R. 3, 4, 5]

By Whom

Compliance alongwith the timeline

Each SBO on the date of commencement of SBO Amendment Rules, 2019 on 8-Feb-2019➔

File declaration with the Reporting Co in Form No. BEN-1 Within 90 i.e. on or before 8-May-2019

Each person becoming SBO/having change in SB Ownership

  • during 8-Feb-2019 to 8-May-2019➔
  • thereafter➔

File declaration with the Reporting Co in Form No. BEN-1

  • within 30 days from 8-May-2019 i.e., 6-Jun-19
  • within 30 days of acquiring SBO/change
Reporting Co ➔ File a return in Form No. BEN-2 with the RoC (on MCA portal) along with fees Within 30 days of receiving declaration in Form No. BEN-1
Maintain a register of SBO in Form No. BEN-3
  • open for inspection by any member of Co

5.

Non-Applicability

[Proviso to S. 90(1) & R. (8)]

If shares of the Reporting Co are held by:-

  • IEPF
  • Holding Reporting Co – details thereof to be reported in Form No. BEN-2
  • CG, SG, local authority
  • Reporting Co/a body corporate/an entity controlled by CG/SGs
  • Investments vehicles such as MFs/AIFs/REITs/InVITs registered with and regulated by SEBI
  • Investments vehicles regulated by RBI/IRDA/PFRDA

6.

Addl responsibility on Co

[S. 90 (5), (6), (7)]

Step 1 Co ↓

Step 2 Such person ↓

Step 3 Co ↓

has to give notice to any person (whether or not a member of the Co) in Form No. BEN-4 whom the Co knows or has a reasonable cause to believe -

  • to be a SBO of the Co;
  • to be having knowledge of the identity of a SBO or another person likely to have such knowledge; or
  • to have been a SBO of the Co at any time during 3 years immediately preceding the date on which the notice is issued,

and who is not registered as a SBO with the Co u/s. 90
  • gives requisite information to the Co within 30 days (& is satisfactory)

– -
  • fails to give the requisite information to the Co within the specified time/information given is not satisfactory
  • Has to apply to NCLT within 15 days of the expiry of the period specified in the notice, for an order directing that the shares in question be subject to restrictions with regard to transfer of interest, suspension of all rights attached to the shares and such other matters