The Companies Act 2013: Significant Beneficial Ownership

People who hold not less than 25% of the benefit interests or right to exercise control over the company needs to disclose his/her areas of interests within the period of investment.

What is Significant Beneficial Ownership?

There are different conditions where the beneficial ownership can be determined by the company. The beneficial ownership gives individual the right to exercise any or all rights attached to his shares or receive/participate in any dividend or other distribution in context of the share.

In case the member is a company or partnership firm it should not hold less than 10% of the share capital or entitled to not less than 10% of the profits of the partnership. In case the member is a trust then it should include all the information about the settler, trustee and beneficiary with not less than 10% interest in the trust.

Role of the Companies (as per the Act)

As per Section 90, of the Companies Act, 2013, every company should maintain a register of interest (BEN-3) as declared by the respective individuals with the name of the individual, address, date of birth and details of ownership in the company.

The register will be open for inspection by any member of the company on payment of the prescribed fee. The company also needs to file returns of significant beneficial ownership and the changes (if any).

The company can also apply to the Tribunal within 15 days of the expiry period (while filing return) asking for restrictions on the shares in question or restricting/transferring  the rights of the person in case any information furnished in incorrect or false.

Latest Amendments in Significant Beneficial Ownership

Recently, the Ministry of Corporate Affairs has brought in amendments in the governing rules of Significant Beneficial Ownership. Now, it is mandatory for all the beneficial owners to declare their interests in the company.

The new rules have also listed down detailed criteria for the indirect holdings of an individual in a company to determine its authenticity. 

• Every Significant Beneficial Owner needs to file his/her declaration in form no. BEN-1 to the reporting company within 90 days from the commencement of the company.
• In case of any changes, the form needs to be filed within 30 days from getting the ownership in the company.
• Upon receiving the declaration the same needs to be filed within 30 days as a return in form no. BEN-2.
• The company needs to disclose the information for all its members who are not individuals and hold more than 10% shares in form no. BEN-4.

Exemptions

In these amendments presented by the department there are a few exemptions for individuals who hold the shares of the company as

• It’s holding reporting company.
• Investor Education and Protection Fund.
• The Central Government, State Government or any local authority.
•  Any entity controlled by the Central/State Government or partly by either Central or State Government.
• Investment Options registered under the Securities and Exchange Board of India (SEBI), Reserve Bank of India, Insurance Regulatory or Development Authority of India or Pension Fund Regulatory and Development Authority.