Due date for filing Form BEN- 2 is 30th July 2019
Dear Sir / Madam,
The Ministry of Corporate Affairs (MCA) on 13 June, 2018 had notified the amendment to section 90 of the Companies Act, 2013 (the Act) through the Companies (Amendment) Act, 2017, and issued the Companies (Significant Beneficial Owners) Rules, 2018 (Rules) outlining the requirements for declaration of significant beneficial owners (SBO) in an Indian company.
Every reporting company, where its member (other than an individual), holds not less than ten per cent of its;-
(a) shares, or
(b) voting rights, or
(c) right to receive or participate in the dividend or any other distribution payable in a financial year,
give notice to such member, seeking information in accordance with sub-section (5) of section 90, in Form No. BEN-4.
The duty is on the reporting Indian company to identify a Significant Beneficial Owner (SBO) and inform such SBO to make a declaration to the Company in Form BEN-1.
Further, the reporting company shall file a return in Form No. BEN-2 with the Registrar in respect of such declaration from its members, along with the fees as prescribed which has to be filed by 30th July 2019 ( 30 days from the date of deployment of Form in MCA portal which was 1st July 2019).
In this regard, following are the few definitions which need to be considered:
- Significant Beneficial Owner (SBO)
“SBO” in relation to a reporting company, means an individual referred to in section 90(1) of the Act, 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:
- holds indirectly, or together with any direct holdings, not less than 10% of the shares;
- holds indirectly, or together with any direct holdings, not less than 10% of the voting rights in the shares;
- 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;
- has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct holdings alone.
- Majority stake
The Amendment Rules inserted a new term, “Majority Stake,” which means –
- holding more than one-half of the equity share capital in the body corporate; or
- holding more than one-half of the voting rights in the body corporate; or
- having the right to receive or participate in more than one-half of the distributable dividend or any other distribution by the body corporate.
- Significant influence
“Significant influence” means the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company but is not control or joint control of those policies.
- Determination of SBO
To determine the SBO, an individual must first qualify under the criteria outlined under the definition of SBO, and should hold rights or entitlements indirectly in the reporting company.
An individual shall be considered to hold a right or entitlement indirectly in the reporting company, if any of the following criteria, in respect of a member of the reporting company are satisfied:
Criteria for having right or entitlement in the reporting Company
If the member of the reporting company is a body corporate (whether incorporated or registered in India or abroad), other than a LLP.
An individual who –
(a) holds majority stake in that member; or
(b) holds majority stake in the ultimate holding company (whether incorporated or registered in India or abroad) of that member.
If the member of the reporting company is a Hindu Undivided Family (HUF) (through Karta).
An individual who is the Karta of the HUF.
If the member of the reporting company is a partnership entity (through itself or a partner).
An individual who –
(a) is a partner; or
(b) holds majority stake in the body corporate, which is a partner of the partnership entity; or
(c) holds majority stake in the ultimate holding company of the body corporate, which is a partner of the partnership entity.
If the member of the reporting company is a trust (through trustee).
An individual who –
(a) is a trustee in case of a discretionary trust or a charitable trust;
(b) is a beneficiary in case of a specific trust;
(c) is the author or settlor in case of a revocable trust.
If the member of the reporting company is a pooled investment vehicle or an entity controlled by the pooled investment vehicle, based in a 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 the International Organisation of Securities Commissions.
An individual in relation to the pooled investment vehicle, who –
(a) is a general partner; or
(b) is an investment manager; or
(c) is a Chief Executive Officer where the investment manager of such pooled vehicle is a body corporate or a partnership entity.
If the member of a reporting company is a pooled investment vehicle or an entity controlled by the pooled investment vehicle,based in a jurisdiction other than mentioned in clause (5) above.
An individual who belongs to any of the clauses in (1) to (4) above.
- Exclusion for “Direct Holding”
The Amendment Rules provide that when an individual holds any rights or entitlement directly in the reporting company, the said individual shall not be considered as SBO. Holding of rights or entitlement directly in the reporting company would require satisfaction of the following criteria –
- The shares in the reporting company representing such right or entitlement are held in the name of the individual;
- The individual holds or acquires a beneficial interest in the share of the reporting company under sub-section (2) of section 89 of the Act, and has made a declaration in this regard to the reporting company.
- Exclusions from applicability of SBO Rules
SBO Rules are not applicable to the extent the shares of the reporting company are held by –
- An authority constituted by the Central Government for administration of the Investor Education and Protection Fund.
- Holding reporting company where the details of such company are provided in Form BEN -2 ( i.e., where Holding Company of reporting Company is in India)
- The Central Government, State Government or any local authority
- A reporting company, body corporate or an entity controlled by the Central Government or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments.
- Securities and Exchange Board of India registered investment vehicles such as mutual funds, alternative investment funds, real estate investment trusts, and infrastructure investment trust.
- Investment vehicles regulated by the Reserve Bank of India, or Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority.
Kindly go through and let us know for anything in this regard.
Vishnu Daya Tax Alert
Vishnu Daya & Co LLP
GF 7 & 3rd Floor, Karuna Complex, No. 337, Sampige Road,
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