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SBO (Significant Beneficial Ownership) Compliance under Companies Act 2013

SBO (Significant Beneficial Ownership) Compliance under Companies Act 2013

In order to widen the scope and increase clarity and transparency, certain amendments were made to the Companies (Significant Beneficial Ownership) Rules, 2018 vide Companies (Significant Beneficial Ownership) Amendment Rules, 2019 dated 08-02-2019. Following are the Significant Beneficial Ownership Compliance under the Companies Act, 2013.

Meaning of Significant Beneficial Owner

“Significant beneficial owner” in relation to a reporting company means an individual referred to in sub-section (1) of section 90, who acting alone or together, or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting company, namely: -

i. holds indirectly, or together with any direct holdings, not less than 10% of the shares;
ii. holds indirectly, or together with any direct holdings, not less than 10% of the voting rights in the shares;
iii. has right to receive or participate in not less than 10% of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings;
iv. has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct holdings alone:

By inserting various Explanations to this definition, the government tried to bring more clarity to the definition.

Compliances under Significant Beneficial Ownership

Following are the compliances that a company needs to ensure with respect to Significant Beneficial Ownership:

1) Identification of Significant Beneficial Owners

The reporting company shall find out the individuals who are significant beneficial owners by taking necessary steps and cause such individuals to make a declaration of significant beneficial ownership in Form No. BEN-1.

2) Declaration under Section 90

The following points merit consideration in this regard:

  • Existing significant beneficial owners, on the date of commencement of this rule, shall file a declaration of significant beneficial ownership within 90 days of such commencement in Form No, BEN-1 to the reporting company.
  • Individuals acquiring significant beneficial ownership subsequently or where there is any change in such ownership shall report to the reporting company by filing the declaration in Form No. BEN-1 within 30 days of becoming acquiring such ownership or undergoing such change, as the case may be.
  • For individuals becoming the significant beneficial owner or undergoing any change in such ownership within 90 days of commencement of this rule, they shall be deemed to have become such owner or undergoing such change after the expiry of 90 days and thus, the period of 30 days shall be reckoned accordingly.

3) Return of significant beneficial ownership

The reporting company shall file a return with the Registrar in Form No. BEN-2 within 30 days of receipt of the declarations stated as above along with the prescribed fees.

4) Register of Significant Beneficial Ownership

The company shall be responsible for maintaining a register of Significant Beneficial Owners in Form No. BEN-3 shall be open for inspection by any member of the company during business hours on every working day at reasonable times for at least 2 hours. The inspection shall be subject to payment of prescribed fees not exceeding Rs. 50 for each inspection.

5) Notice Seeking Information from Members

A company can issue a notice in Form No. BEN-4 seeking information about significant beneficial ownership.

6) Application to the Tribunal

The reporting company may apply to the tribunal where: The information, as required by the notice in Form No. BEN-4 was not provided by any person

  • Where the information, as required by Section 90(7), is not satisfactory for the order directing restrictions on the shares that are subject to question including
  • Restrictions on the transfer of interest
  • Suspension of right to receive a dividend or any other distribution
  • Suspension of voting rights
  • Any other restriction, whether applied to all or any of the rights related to the shares in question

Non-Applicability

The above rules shall not apply to such shares of the reporting entity as held by the following entities:

  • The authority constituted under Section 125(5) of this act (Authority for the administration of Investor Education and Protection Fund)
  • Holding company of the reporting entity. However, the details of the holding company shall be reported in Form No. BEN-2
  • Central Government, State Government or any local authority
  • Following entities controlled by CG or SG or partly by CG and one or more SG
  • An entity
  • A body corporate
  • Reporting company
  • SEBI registered and regulated Investment Vehicles (AIF, REITs, INVITs)
  • Investment Vehicles regulated by RBI, IRDAI, or PFRDA.

Bottom Line

Above were the significant beneficial ownership requirements that need to be observed by the companies. In case of any query, feel free to contact the professionals to receive expert advice and assistance.

 

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