Identifing the actual owner of a company
Declaration by Significant Beneficial Owners
Ministry of Corporate Affairs, Government of India has brought in new Section 90 to the Companies Act, 2013 and Rules in respect thereof, recently.
The substance of the new provisions is given in the attached word file. As per the new provisions, following compliances are mandatory and non compliance would attract heavy penalty as given below.
1. Every individual who holds beneficial interest of not less than ten per cent. in shares or has significant control of a company shall make a declaration to the company in Form BEN-1.
2. When shares are held through another Company, Firm and/or Trust, holding not less than 10% of Capital / interest in the said Company, Firm and/or Trust would make an individual have significant beneficial ownership.
3. Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, would become liable to give the declaration if the above thresholds are met.
Examples in respect of the above three points are given in the Attached word file to facilitate understanding.
4. Every company shall maintain a register of the beneficial interest declared by individuals in Form BEN- 3.
5. Every company shall file a return of significant beneficial owners of the company and changes therein with ROC in Form BEN-2.
For non declaration by individuals: Minimum Rs. 1 Lakh (Maximum Rs. 10 Lakhs) and Rs. 1000 per day of continuing default.
For non maintenance of Register and Non filing of Form by the Company: Minimum Rs. 10 Lakhs (Maximum Rs. 50 Lakhs) for the company and each officer of the company in default and Rs. 1000 per day of continuing default.
The new provisions are not applicable to shares held by certain Funds and Trusts regulated under SEBI Act.
Individual A holds 11% of Shares in XYZ Limited. The actual owner of these shares are Individual B and he holds the shares in the name of Individual A. Form BEN-1 has to be given by B to XYZ Limited.
ABC Private Limited holds 10% shares in XYZ Limited. Individuals C and D hold 50% shares of ABC Private Limited. C and D have to give Form BEN-1 to XYZ Limited.
Following is the Share Holding of XYZ Private Limited.
Individual A = 10%
Individual B = 8%
Individual D (Through Individual C) = 12%
ABC Private Limited = 70%
Share Holding of ABC Private Limited:
Individual E = 10%
Individual F = 8%
Individual G = 6%
DEF Private Limited = 76%
Share Holding of DEF Private Limited:
Individual H = 50%
Individual I = 8%
Individual J = 10%
Individual K = 32%
Following persons will give Form BEN-1 to XYZ Private Limited
If in this example Individuals F and G are closely related they will also have to give Form BEN-1 to XYZ Private Limited.
If the holdings were of Partnerships, LLPs, Trusts or other Legal persons also the same principles will apply as in above examples.