The Ministry of Corporate Affairs, rolls out the Companies (Significant Beneficial Owners) Amendment Rules, 2019 (“Amendment Rules”), effective 8^th February, 2019.

Background:

The Companies (Significant Beneficial Owners) Rules, 2018 (“Principal Rules”) came into effect on 14^th June, 2018. The objective behind notifying the Principal Rule was to determine the identity of the persons having a significant ownership of shares in a company and is principally having the controlling power over the management of the company.

As per Section 90 of the Companies Act, 2013, every individual who is 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 10 percent 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 over the company, will be required to provide a declaration to such company specifying the nature of his interest and other particulars regarding the shareholding. Pursuant to the notification of the Principal Rules, the threshold revised to 10% and above.

Key Highlights:

1. Prior to the amendment, the major deviation under the Rules from Section 90(1) of the Companies Act, 2013 (“Act”) was that the threshold provided for an individual classified as a Significant Beneficial Owner was 10% in contrast to the threshold of 25% prescribed under the Act. However, the current scenario dictates the meaning of Significant Beneficial Owner in relation to a reporting company as an Individual who is 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.
2. The concept of ‘Reporting Company’ has been introduced through the Amendment Rules. The definition of ‘Reporting Company’ is similar to that of the definition of Company as per the Act. A reporting company is also required to follow the obligations as provided in Section 90 which deals with the beneficial ownership of shares.
3. The duty of the reporting company has been prescribed by way of the amendment Rules. The Reporting Company shall take steps identify the Significant Beneficial Owner who shall make a declaration in revised Form BEN-1.

Prior to the amendment, there was no specific provision which required the reporting company to give notice to members to seek information holding more than ten percent of shares, voting rights or right to receive or participate in the dividend or any other distribution payable in a financial year.

4. Form BEN-1 which deals with the Declaration to be submitted by the beneficial owner who holds or acquires significant beneficial ownership in shares to the reporting company has been revised. Prior to the amendment, submission of particulars of the shares in which significant beneficial interest is held by the person making declaration was sufficient. The current scenario dictates selection of multiple choices such as nature of indirect holding or exercise of right in the reporting company through member of the reporting company.

5. Form BEN-2 which deals with Return to the Registrar in respect of declaration under section 90 to be submitted by the reporting company have been revised. The amended Form states that the e-form will be maintained by the register of companies through electronic mode and on the basis of statement of correctness given by the Director and professional. Particulars of a Practicing Professional including Director identification number of the director; or DIN or PAN of the manager or CEO or CFO; or Membership number of company secretary are also required to be submitted along with the Form.

6. Form BEN-3 which deals with maintenance of registers significant beneficial owners by the company has been revised as well. The amended form dictates that the company need not maintain particulars of the shares in which significant beneficial interest is held by the beneficial owner.

7. Form BEN-4 by which a company is required to give notice to such member, seeking information in accordance with sub-section (5) of Section 90 has been revised. The Form requires attachment of Form BEN-1 along with BEN-4 for compliance.

Source: Ministry of Corporate Affairs

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