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Significant Beneficial Owner

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Significant Beneficial Owner

Ministry of Corporate Affairs in order to check the actual holding in any Company has made certain major changes in the Companies Act, 2013, under this, all the entities except individual, holding shares in any company are required to disclosure the major holding of their entity to such company within the stipulated time period. For instance ABC Limited holding 30% shares in the BCD Limited, now as ABC Limited is the corporate/ artificial entity and decision in taken by someone else in this company like must be by A and B holding 50-50% shares in ABC Limited, now here ABC Limited would be requested to disclose their owner details of BCD Limited. This will also help to reduce the illegal activities.

So let us do the in-depth analysis of the concept Significant Beneficial Owner.

Significant Beneficial Owner

Significant Beneficial Owner Means

S. No.

When Member is 

Following will be considered as Significant Beneficial Ownership

1.

An Individual holding not less than 10% either Indirectly or together with direct holding

  1. Shares or
  2. Voting rights or
  3. Total distributable dividend, or any other distribution in a financial year or
  4. Significant Influence  i.e. 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 or
  5. Control i.e. 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;

Individual himself

2.

Body Corporate

Individual holding:

  1. Majority Stake in that member or
  2. Majority stake in the Ultimate holding Company
3.

Hindu Undivided Family (HUF)

Karta of HUF

4.

Partnership (also include LLP)

Individual who

  1. Is a Partner or
  2. Holds majority stake in body corporate and is also the Partner of the Partnership Entity or
  3. Holds majority stake in Ultimate Holding Company and is also the Partner of the Partnership Entity
5.

Trust

 Individual who

  1. Trustee of the Discretionary Trust or Charitable Trust
  2. Beneficiary of Specific Trust
  3. Author or Settlor of Revocable Trust
6.

Pooled Investment Vehicle or Entity Controlled by 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

Individual who is

  1. General Partner or
  2. Investment Manager or
  3. CEO in case where Investment Manager is a Body Corporate or Partnership Entity

For the purpose of Definition of Significant Beneficial Owner,

“Shares” also includes the instruments in the form of global depository receipts, compulsorily convertible preference shares or compulsorily convertible debentures

“Acting together” means any individual, or individuals acting through any person or trust, act with a common intent or purpose of exercising any rights or entitlements, or exercising control or significant influence, over a reporting company, pursuant to an agreement or understanding, formal or informal.

“Majority Stake” means;-
  1. holding more than one-half of the equity share capital in the body corporate; or
  2. holding more than one-half of the voting rights in the body corporate; or
  3. having the right to receive or participate in more than one-half of the distributable dividend or any other distribution by the body corporate;

Applicability of SBO :

The reporting of Significant Beneficial Ownership by every individual in Form BEN-1 is applicable on every Company except where the shares of Reporting Entity are held by:

  1. IEPF Authority
  2. Holding Reporting Company (HRC) if the details of HRC is reported in BEN-2
  3. Central Government, State Government or Local Authority
  4. Reporting Company/ Body Corporate / an entity controlled by Central Government/ state Government /partly by Central/State Government / one or more state governments
  5. Securities and Exchange Board of India registered Investment Vehicles such as mutual funds, alternative investment funds (AIF), Real Estate Investment Trusts (REITs), Infrastructure Investment Trust (lnVITs) regulated by the Securities and Exchange Board of India,
  6. lnvestment Vehicles regulated by Reserve Bank of India, or Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority.
  7. Individual who does not hold any right or entitlement indirectly
  8. Individual holding or acquiring beneficial interest in the share of the reporting company under sub-section (2) of section 89, and has made a declaration in this regard to the reporting company.

Hence Every Individual member of a Company who is a Significant Beneficial Owner i.e holding 10% or more shares or beneficial interest either (indirectly) or (indirectly as well as directly) is required to submit BEN-1 to the Company. And the Company will be required to file Form BEN-2 within 30 days of receipt of BEN-1. Therefore, the Companies having direct individual shareholding are not required to file BEN-1

Conclusion

This time the law maker has clear intend not to left single dent in the corporate by putting such kind of provision in order to increase transparency in the law. Hope the above article has given you the idea about the applicability of BEN-2 on your company. In case still you have any doubt please feel free to contact us at complianceship@gmail.com

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