SBO Declaration and Compliances under Section 90 of the Companies Act:

Beneficial Interest Declaration and Compliances under Section 90 of the Companies Act, 2013, and Companies (Significant Beneficial Owners) Rules, 2018

Introduction:

In recent years, there has been a growing global concern regarding corporate transparency and the need to curb illicit financial activities such as money laundering and tax evasion. To address these concerns and ensure greater accountability, India enacted Section 90 of the Companies Act, 2013, and the Companies (Significant Beneficial Owners) Rules, 2018. These provisions mandate companies to identify and disclose their Significant Beneficial Owners (SBOs) and require SBOs to make declarations regarding their beneficial interests. In this article, we will explore the regulatory requirements, relevant examples, and the ROC (Registrar of Companies) forms to be filed by companies and individuals, along with associated timelines.

Understanding Significant Beneficial Owners (SBOs):

Section 90 of the Companies Act, 2013, defines a Significant Beneficial Owner as any individual who holds ultimate beneficial interest of not less than 10% in a company’s shares or exercises significant influence or control over the company. Identifying SBOs is crucial to ensure transparency in corporate ownership and decision-making.

Compliances by Companies:

Companies are required to take the following steps:

1. Identification of SBOs: Every company is obligated to identify and maintain a register of SBOs who hold more than 10% of the shares, directly or indirectly.
2. Declaration by SBOs: Companies must send a notice to their shareholders seeking information about significant beneficial ownership. The shareholders, in turn, are obligated to make a declaration to the company if they qualify as SBOs.
3. Filing of Form BEN-2: Based on the received declarations, the company is required to file Form BEN-2 with the Registrar of Companies. This form is to be filed within 30 days of receipt of declarations.

Example: Let’s consider an example where Mr. A holds 15% of the shares of Company XYZ. In this case, Mr. A qualifies as an SBO, and Company XYZ must maintain a register of SBOs and file Form BEN-2 with the ROC.

Compliances by SBOs:

SBOs must follow the following obligations:

1. Declaration of Beneficial Interest: If an individual qualifies as an SBO, they are required to make a declaration in Form BEN-1 to the concerned company.
2. Providing Necessary Information: SBOs must provide information to the company regarding their beneficial interest in the prescribed format.
3. Filing of Form BEN-2: If the SBO does not comply with the declaration requirement, the company must report this to the ROC in Form BEN-2.

Example: Suppose Mr. B owns 11% of the shares in Company ABC. In this case, Mr. B must declare his beneficial interest to Company ABC using Form BEN-1.

ROC Forms and Timelines:

The following ROC forms are to be filed under the Companies Act, 2013, and the Companies (Significant Beneficial Owners) Rules, 2018:

1. Form BEN-1: Declaration by SBOs – To be filed within 30 days of becoming an SBO.
2. Form BEN-2: Return of Significant Beneficial Owners – To be filed by the company within 30 days of receipt of declarations.
3. Form BEN-3: Change in Significant Beneficial Ownership – To be filed within 30 days of the change in SBOs.

Conclusion:

Compliance with the requirements of Section 90 and the Companies (Significant Beneficial Owners) Rules, 2018, is essential for promoting transparency and accountability in corporate ownership. Failure to comply with these provisions can lead to penalties and legal consequences. Companies and SBOs should be aware of their obligations and adhere to the prescribed timelines to avoid any non-compliance issues. It is advisable to seek professional guidance to ensure accurate and timely compliance with these regulations.