Significant Beneficial Ownership (SBO) Rules

The Ministry of Corporate Affairs (MCA), Govt. of India, issued a highly significant notification dated 1st July 2019, to further amend the Companies (Significant Beneficial Owners) Rules, 2018. These rules are notified as being the Companies (Significant Beneficial Owners) Second Amendment Rules, 2019. The revised e-Form No. BEN-2 has also been informed, which is available on the MCA-21 Portal and can be filled by 30 September 2019 without any additional fees. Again, according to this Companies (SBO) Second Amendment Rules of 2019, the time limit for filing the e-form BEN-2 is extended till 30 September 2019, failing which the form shall be filed with additional fee. The e-Form BEN-2 is nothing but about the Return to be filedby the Reporting Company with the concerned Registrar in respect of the Declaration made under the section 90 of the Companies (Amendment) Act, 2017.

The Section 90 of the Companies Act of 2013, which was notified in June 2018 with effect from then, stipulates the disclosure requirements of the significant beneficial owners in a company located in India. The provisions and rules provided in the section 90 comply with the strict recommendations of the Financial Action Task Force (FATF), which aims to combat money laundering as well as the financing for terrorism.

Any such significant beneficial ownership has been identified through an individual's indirect holdings in the concerned company (the reporting company). This ownership or interest could be by virtue of holding shares or voting rights, or right to distributable dividend or exercising significant influence in the company. Hence, the significant beneficial interest necessarily takes into account the indirect holdings with or without the direct holding/control or direct significant influence. Declaration of the significant beneficial ownership is to be made through Form BEN-1, to the Reporting Company; and the reporting company has to maintain a rigorous Register of the beneficial owners.

Lastly, here it may also be just mentioned that the section 90 (11) of the Companies Act of 2013 contains strict penal provisions for failure in compliance to Companies (SBO) Rules of 2019. Also, the section 448 and the section 449 give information about the likely punishment for the false statement and false evidence, respectively.

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Posted by Anita Aswal - 31th July 19

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