Analysis of SBO (Significant Beneficial Owners) Rules (Applicability, Amendments, E-forms, Definitions, Penal Provisions etc.)
(Due Date Extended to 31.03.2020)
http://www.mca.gov.in/Ministry/pdf/Circular1_01012020.pdf
and as per MCA Circular, CFSS, 2020
No Additional fees shall be charged for late filing of Returns / documents during moratorium period (01.04.2020 to 30.09.2020)
one can opine that, it can be filed between 01.04.2020 to 30.09.2020 without any penalty / additional Fees with the MCA 21.
primary deadline was 31.07.2019:
Form
BEN-2 (Return to the Registrar in respect of declaration under Section 90)
notified vide the Companies (Significant Beneficial Owners) second Amendment
Rules, 2019 dated 1st July 2019 is available for filing purposes now on www.mca.gov.in .
This Form has to be filed within 30 days from the date
of deployment of form on MCA Website i.e. (due date is 31.07.2019)
Provisions
of Section 90 would not trigger in
case of direct holding.
Short
Summary for BEN-2:
1. Indirect Holding is must to file E Form
BEN-2
2. BEN-1 has to be received on or before
08.05.2019
3. First BEN-1 has to be submitted as per the holding status on
08.02.2019 and then for
any subsequent change, fresh BEN-1 required again.
4. Due date for filing BEN-2 is 31.07.2019 and form was revised on
17.07.2019.
5. Applicability : First
thing we need to check the holding (for individual – Indirect + Direct and for
other members of reporting company direct) if holding is more than 10% - then
SBO Provisions are applicable.
Further we have to check the majority of shares held by the individuals
in the members of the reporting Company.
6. Subsidiaries Company are not totally exempted and required to find
SBO in their company as Rule 8 of the SBO rules, have granted exemption to
subsidiary of Indian Holding Companies which are reporting SBO up to the extent
of shares held by those holding companies in subsidiary company.
BO ID:
7. SBO ID : It is a 10 digits unique identification
number of such person (SBO).
The
moment eForm BEN-2 has filed, the SBO id gets generated instantly and it will
be sent on the email id of the SBO entered in the form.
·
Filing Steps:
1.
Significant Beneficial Owner (SBO) have to file a declaration in Form No. BEN-1
to the reporting company within ninety days from commencement of the Companies
(Significant Beneficial Owners) second Amendment Rules, 2019 dated 08.02.2019.
It means
BEN-1 should be submitted on or before 09.05.2019 (90 days from the date of
commencement 08.02.2019)
2. BEN-2
has to be filed within 30 days from the date of receipt of declaration in Form
BEN-1 (within 30 days from the date of deployment).
·
Introduction:
Ministry
of Corporate Affairs, Government of India wide notification dated 08th
February, 2019 has amended the Companies (Significant Beneficial Owners) Rules
2018.
These
rules may be called the Companies (Significant Beneficial Owners) Amendment
Rules, 2019. They shall come into force on the 08th day of February,
2019.
·
Governing Laws and Regulations:
1.
Companies (Significant Beneficial Owners) Rules 2018
2.
Companies (Significant Beneficial Owners) second Amendment Rules, 2019
3. Section
90 of the Companies Act, 2013
Ø Section 90 of the Companies Act 2013:
Section
90(4):
“Every
company shall file a return of significant beneficial owners of the company and
changes therein with the Registrar containing names, addresses and other details
as may be prescribed within such time, in such form and manner as may be
prescribed.”
Ø Rule 4 Companies (Significant Beneficial Owners) Rules
2018 and Companies (Significant Beneficial Owners) second Amendment Rules, 2019:
“Upon
receipt of declaration under rule 3, the reporting company shall file a return
in Form No. BEN-2 with the Registrar in respect of such declaration, within a
period of thirty days from the date of receipt of such declaration by it, along
with the fees as prescribed in companies (Registration offices and fees) Rules,
2014.”.
Ø Section 90 shall not apply to the Govt. Companies as
per MCA Circular no. G.S.R.,163(E) dated 05.06.2015
And only
those Government Company’s are exempted which has not committed a default in
filing its financial statements under section 137 of the Companies Act 2013 or
Annual Return under section 92 of the said Act with the Registrar.
·
Important definition:
Section 2
(d) “majority stake” means;-
(i) holding more than ½ (50%) of the equity share
capital in the body corporate;
or
(ii) holding more than ½ (50%) of the voting rights
in the body corporate; or
(iii)
having the right to receive or participate in more than ½ (50%) of the distributable dividend or any other
distribution by the body corporate;
(f) “reporting company” means a
company as defined in section 2(20) of the Act, required to comply with the
requirements of section 90 of the Act;
Section 2(20)"company"
means a company incorporated under this Act or under any previous company law;
(h) “Significant Beneficial Owner”
In relation to a reporting Company means:
Individual
(natural person) (Section 90(1) 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 indirect + direct holdings,
not less than 10% of the shares;
(ii)Holds indirectly / or indirect + 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 indirectly / or indirect +
direct holdings
(iv) has right to exercise, or actually
exercises, significant influence or control, in any manner other than through
direct holdings alone:
Direct Holding : If name of
the Person is appeared in the Register of Members of the Reporting Company,
treated as Direct holding
Indirect Holding: If holding
is not direct as mentioned above. Name of the Individual is not mentioned in the register of the Members
of the reporting Company.
·
Control is defined under Section 2(27) : "control" shall include the right
to appoint majority of the directors or to control the management or policy
decisions exercisable by a person or persons acting individually or in concert,
directly or indirectly, including by virtue of their shareholding or management
rights or shareholders agreements or voting agreements or in any other manner;
v
Important Provisions:
1. An
Individual shall not be considered to be a significant beneficial owner, if:
He does not hold any right or entitlement
indirectly under
sub-clauses (i), (ii) or (iii),
2. Direct
Holding: An
individual shall be considered to hold a right or entitlement directly in the
reporting company, if he satisfies any of the following criteria, namely.––
(i) the shares in the reporting company
representing such right or entitlement are held in the name of the individual;
(ii) the individual holds or acquires a
beneficial interest in the share of the reporting company under subsection (2)
of section 89, and has made a declaration in this regard to the reporting
company.
3. Indirect
Holdings: an individual shall be considered to hold a right or entitlement indirectly in the reporting
company, if he satisfies any of the following criteria, in respect of a member of the reporting company, namely:- where the member of the reporting
company is-
(i) a body
corporate (whether incorporated or registered in India or abroad), other
than a limited liability partnership, and the individual,––
·
holds majority stake in that member;
or
·
holds majority stake in the ultimate holding
company (whether incorporated or registered in India or abroad) of that
member;
·(Majority Stake more than 50% as defined
under Section 2(d) of SBO Rules)
(ii) a Hindu Undivided Family (HUF) (through
karta), and the
individual is the karta of the HUF;
(iii) a
partnership entity (through itself or a partner), and the individual,-
(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.
(iv) a
trust (through trustee), and the individual,-
(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.
(v) (a) a pooled investment
vehicle; or
(b) an entity controlled by the pooled
investment vehicle,
based in 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 Organization of
Securities Commissions, and the individual in relation to the pooled investment
vehicle,-
(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.
(i) “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’.
·
Duty of the reporting company (Rule 2A of SBO Rules)
1. To
find out / identify significant beneficial owner as defined under Rule 2(h) and cause such individual to make a
declaration in Form No. BEN-1. Declaration should be dated on or before
09.05.2019 (with in 90 days from the date of Commencement of SBO Amendment
rules 2019 dated 08.02.2019)
2. every
reporting company shall in all cases 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 section 90 (5), in Form No. BEN-4.
Section
90 (5) of the CA, 2013:
A company shall give
notice, in the prescribed manner, to any person (whether or not a member of the
company) whom the company knows or has reasonable cause to believe—
(a) to be a
significant beneficial owner of the company;
(b) to be having
knowledge of the identity of a significant beneficial owner or another person
likely to have such knowledge; or
(c) to have been a
significant beneficial owner of the company at any time during the three years
immediately preceding the date on which the notice is issued,
and who is not
registered as a significant beneficial owner with the company as required under
this section.
Form BEN-4 :
·
Declaration of significant beneficial ownership under
section 90 (Rule 3 of SBO
Rules):
1. On the
date of commencement of the Companies
(Significant Beneficial Owners) Amendment Rules, 2019 (dated
08.02.2019), every individual who is a significant
beneficial owner in a reporting company, shall file a declaration in Form No. BEN-1 to the reporting
company within ninety days from such
commencement (on or before 09.05.2019 i.e. 90th day from 08.02.2019).
2. In
case Subsequent Acquisition of the title of Significant Beneficial Owner
/ Any Change therein a declaration in Form No. BEN-1
required to be filed to the reporting company, within 30 days of acquiring such significant beneficial ownership
or any change therein.
v Kindly note that:
Where an individual becomes a significant beneficial owner, or
where his significant beneficial ownership undergoes any change, within 90
days of the commencement of the Companies (Significant Beneficial
Owners) Amendment Rules, 2019, it shall be deemed that such individual
became the significant beneficial owner or any change therein happened on the
date of expiry of ninety days from the date of commencement of said rules, and
the period of thirty days for filing will be reckoned accordingly.
· Return
of significant beneficial owners in shares (Rule 4 of SBO Rules)
Upon receipt of declaration (in
form BEN-1) under rule 3, the Reporting
Company shall file a return
inForm No. BEN-2 with the Registrar in respect of such declaration,
within a period of thirty days from
the date of receipt of such declaration by it, along with the fees as
prescribed in Companies (Registration offices and fees) Rules, 2014.”.
·
Register of significant beneficial
owners (Rule 5 of SBO Rules)
(1) The company shall maintain a register of
significant beneficial owners in Form
No. BEN-3
(2) The register shall be open for inspection during business hours,
at such reasonable time of not less than two hours, on every working day as the
board may decide, by any member of the company on payment of such fee as may be
specified by the company but not exceeding fifty rupees for each inspection.
·
Notice
seeking information about significant beneficial owners (Rule 6 of SBO Rules)
A company shall give notice
seeking information in accordance with under section 90(5) in Form No. BEN-4
Application
to the Tribunal (Rule 7 of SBO Rules)
The reporting company shall apply to the Tribuna:,
(i) where any person fails to
give the information required by the notice in Form No. BEN-4, within the time
specified therein; or
(ii) where the information given
is not satisfactory,
in
accordance with sub-section (7) of section 90, for order directing that the
shares in question be subject to restrictions, including
(a) restrictions on the transfer
of interest attached to the shares in question;
(b) suspension of the right to
receive dividend or any other distribution in relation to the shares in
question;
(c) suspension of voting rights
in relation to the shares in question;
(d) any other restriction on all
or any of the rights attached with the shares in question]
Non-Applicability of the NFRA, Rules to the
extent the share of the reporting company is held by: (RULE 8 of SBO Rules)
a) the authority
constituted under sub-section (5) of section 125 of the Act – IEPF Authority;
(b) its holding
reporting company:
Provided that the
details of such holding reporting company shall be reported in Form No. BEN-2
(c) the Central
Government, State Government or any local Authority;
(d) (i) a reporting
company, or
(ii) a body
corporate, or
(iii) 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;
(e) SEBI registered
Investment Vehicles such as mutual funds, alternative investment funds (AIF),
Real Estate Investment Trusts (REITs), Infrastructure Investment Trust (InVITs)
regulated by the SEBI,
(f)Investment
Vehicles regulated by Reserve Bank of India, or Insurance Regulatory and
Development Authority of India, or Pension Fund Regulatory and Development
Authority.
·
Penal Provisions
Section 90(10) If any person fails to make
a declaration as required under Section 90(1), he shall be punishable with fine
which shall not be less than Rs. 1,00,000 but which may extend to Rs. 10,00,000
and where the failure is a continuing
one, with a further fine which may extend to Rs. 1000 for every day after the first during which the
failure continues.
Section 90(11) If a company, required to
maintain register under Section 90(2)
and file the information under section
90(4), fails to do so or denies inspection as provided therein, the company and every officer of the company
who is in default shall be punishable
with fine which shall not be less than Rs. 10,00,000 but which may extend to Rs.
50,00,000 and where the failure is a continuing one, with a further fine which may extend to Rs. 1000 for every day after the
first during which the failure continues.
Section 90(12) If any person wilfully furnishes any false or
incorrect information or suppresses any material information of which
he is aware in the declaration made under this section, he shall be liable to action under section 447.
·
Section 447 is for Punishment for Fraud.
Without prejudice to any liability including repayment of any debt under
this Act or any other law for the time being in force, any person who is found
to be guilty of fraud 1[involving an amount of at least ten lakh rupees or one
per cent. of the turnover of the company, whichever is lower] shall be
punishable with imprisonment for a term which shall not be less than six months
but which may extend to ten years and shall also be liable to fine which shall
not be less than the amount involved in the fraud, but which may extend to
three times the amount involved in the fraud:
Provided that where the fraud in question involves public interest, the
term of imprisonment shall not be less than three years.
Provided further that where the fraud involves an amount less than ten
lakh rupees or one per cent. of the turnover of the company, whichever is
lower, and does not involve public interest, any person guilty of such fraud
shall be punishable with imprisonment for a term which may extend to five years
or with fine which may extend to fifty lakh rupees or with both.
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