Companies (Significant Beneficial Owners) Rules, 2019
MCA in its continuous effort for making strict compliance requirement and making Indian business market a transparent one, MCA have made a recent amendment in Companies (Significant Beneficial Owners) Rules, 2018 which had come into force on 08.02.2019.
Key Changes in the Rules:-
Majority Stake
· Holding More than 1/2 of Equity Share Capital (ESC) in a Body Corporate.
· More than 1/2 Voting Rights (VR) in a Body Corporate.
· Right to receive or participate in more than 1/2 of Dividend or other distribution by a Body Corporate.
Reporting Company
Means a company incorporated under Companies Act, 2013 or under any previous company law.
Significant Beneficial Owner
As per the amended Section 90 of the Companies Act, 2013, SBO is referred as:-
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 25% 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 per the definition, the government is empowered to prescribe other holding percentage even for the determination of the SBO.
Accordingly, SBO means an Individual u/s 90(1) of Companies Act, 2013, who holds:-
· Minimum 10% of shares or 10% Voting Rights in the reporting company, indirectly or together with directly holding,
· Right to receive or participate in minimum 10% of total dividend or any other distribution indirectly or together with directly holdings.
· Right to exercise or exercises significant influence or control through indirectly holding.
Significant influence
Means the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company.
Explanations
Explanation 1– If no indirect holding in shares/VR/Rights, then individual not to be treated as SBO.
Explanation 2 & 3 – Determination of direct and indirect holdings
An individual be considered to hold any right or entitlement directly in a reporting company if any of the 2 conditions are satisfied:-
· Shares are held in the name of the individual or,
· Holds or acquires beneficial interest in the company u/s 89(2) and made declaration in Form No. MGT-5.
2. An individual be considered to hold any right or entitlement indirectly in a reporting company in respect of a member of the reporting company if any of the conditions are satisfied:-
· Where member is a Body Corporate- individual holds majority stake in that member or holds majority stake in the ultimate holding company of that member.
· Where member is the HUF and individual is the karta of HUF.
· Where member is the partnership entity and individual is a partner or holds majority stake in the body corporate which is a partner of the partnership entity; or holds majority stake in the ultimate holding company of the body corporate which is a partner of the partnership entity.
· Where the member of the reporting company is a trust (through trustee), and the individual is a trustee or a beneficiary or an author or settlor.
· Where the member of the reporting company is a pooled investment vehicle or an entity controlled by the pooled investment vehicle and the individual in relation to the pooled investment vehicle is a general partner or an investment manager or a CEO.
3. If the investment vehicle mention in (3) does not fulfill the requirement then provisions of 1, 2, 3 shall apply.
4. If any individual, or individuals acting through any person or trust, act with a common intent such individual, or individuals, acting through any person or trust, as the case may be, shall be deemed to be ‘acting together’.
5. GDR, compulsorily convertible preference shares or compulsorily convertible debentures shall be treated as ‘shares’.
Amendment Key Points
1. New amendment impose a duty on the reporting company to check if there is any SBO or not and made them to make a declaration in Form BEN-1.
2. Where Member holds a minimum 10% of shares or VR or right to receive dividend or any distribution, Reporting Company shall send notice to member in Form BEN-4 seeking information u/s 90(5).
3. SBO shall within 90 days from commencement from this rule i.e. 9thMay, 2019 file declaration in Form BEN-1to reporting company.
4. SBO shall within 30 days from becoming a SBO or any change therein file declaration in Form BEN-1. Provided if there is any such case within 90 days then he will be deemed to be a SBO from such date and period of 30 days will be reckoned accordingly.
5. Reporting Company shall file Form BEN-2 within 30 days to Registrar upon receipt of Form BEN-1, along with fees.
6. Reporting Company shall apply to NCLT in Form BEN-4, where any person fails to give information within time specified or the information is not satisfactory.
7. The Company shall maintain a register of SBO in Form BEN-3.
8. Exemptions to the shares held by:-
· IEPF authority,
· Holding reporting company,
· Central Government, State Government or local authority or company controlled by such Government,
· SEBI
· Investment Vehicles regulated by RBI or IRDAI or PF Regulatory Authority
Conclusion
The revised rules determining the SBO has been drastically changed only with the intent to facilitate the implementation of the provision and to remove the practical difficulties faced by the stakeholders in complying with the requirements of the provisions.
For your ready reference: mca.gov.in/CompaniesOwnersAmendmentRules
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