Significant Beneficial Owners Rules 2018

1. Short title and commencement

[To be Published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (I)

Government of India
Ministry of Corporate Affairs
Notification

New Delhi, 14th June,2018

GSR (E)_. In exercise of the powers conferred by Section 90 read with sub-section (I) of section 469 of the Companies Act,2013 (18 of 20I3), the Central Government hereby makes the following rules, namely

1.Short title and commencement.-

(1) rules may be called the Companies (Significant Beneficial Owners) Rules,20I8.
(2) They shall come into force on the date of their publication in the Official Gazette

2. Definitions

(I) In these rules, unless the context otherwise requires,-

(a) “Act” means the Companies Act,2013 (18 of 2013);

1[(b) “control” means control as defined in clause (27) of section 2 of the Act

(c) “form” means the form specified in Annexure to these rules;

(d) “majority stake” means;-

(i) holding more than one-half of the equity share capital in the body corporate; or

(ii) holding more than one-half of the voting rights in the body corporate; or

(iii) having the right to receive or participate in more than one-half of the distributable dividend or any other distribution by the body corporate;

(e) “partnership entity” means a partnership firm registered under the Indian Partnership Act,7932 (9 of 1,932) or a limited liability partnership registered under the Limited Liability Partnership Act, 2008 (6 of 2009);

(f) “reporting company” means a company as defined in clause (20) of section 2 of the Act, required to comply with the requirements ofSection 90 of the Act;-

(g) “section” means a section of the Act;

(h) “significant beneficial owner” in relation to a reporting company means an individual referred to in sub-section (1) of Section 90, who 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 together with any direct holdings, not less than ten percent, of the shares;

(ii) holds indirectly, or together with any direct holdings, not less than ten percent, of the voting rights in the shares;

(iii) has right to receive or participate in not less than ten per cent, of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings;

(iv) has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct-holdings alone:

Explanation I – For the purpose of this clause, if an individual does not hold any right or entitlement indirectly under sub-clauses (i), (ii) or (iii), he shall not be considered to be a significant beneficial owner.

Explanation II – For the purpose of this clause, 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 sub-section (2) ofsection 89, and has made a declaration in this regard to the reporting company.

Explanation III – For the purpose of this clause, 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: –

(i) where the member of the reporting company is a body corporate (whether incorporated or registered in India or abroad), other than a limited liability partnership, and the individual,

(a) holds majority stake in that member; or

(b) holds majority stake in the ultimate holding company (whether incorporated or registered in India or abroad) of that member;

(ii) where the member of the reporting company is a Hindu Undivided Family (HUF) (through karta), and the individual is the karta of the HUF;

(iii) where the member of the reporting company is 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) where the member of the reporting company is a trust (through trustee), and the individual,-

(a) is a trustee in case of a discretionary trust ora 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) where the member of the reporting company is,-

(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 ora partnership entity.

Explanation IV-Where the member of a reporting company is,

(i) a pooled investment vehicle; or
(ii) an entity controlled by the pooled investment vehicle,

based in a jurisdiction which does not -fulfil the requirements referred to in clause (v) of Explanation III, the provisions of clause (i) or clause (ii) or clause (iii) or clause (iv) of Explanation III, as the case may be, shall apply.

Explanation V – For the purpose of this clause, if 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, such individual, or individuals, acting through any person or trust, as the case may be, shall be deemed to be ‘acting together’.

Explanation VI – For the purposes of this clause, the instruments in the form of global depository receipts, compulsorily convertible preference shares or compulsorily convertible debentures shall be treated as ’shares’.

(1) “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]

(2) Words and expressions used in these rules but not defined and defined in the Act or in Companies (Specification of Definitions Details) Rules, 2014 shall have the meanings respectively assigned to them in the Act and the said Rules

Amendment

1. Substituted by the Companies (Significant Beneficial Owners) Amendment Rules. 2019 Dated 08.02.2019 Original Content

Original Omitted Content:- b) “form” means the form specified in Annexure to these rules;

(c) “registered owner” means a person whose name is entered in the register of members of a company as the holder of shares in that company but who does not hold beneficial interest in such shares;

(d) “section” means a section of the Act

(e) “significant beneficial owner” means an individual referred to in sub-section (1) of section 90 (holding ultimate beneficial interest of not less than ten per cent.) read with sub-section [10] of section 89, but whose name is not entered in the register of members of a company as the holder of such shares, and the term ‘significant beneficial ownership’ shall be construed accordingly;

Explanation l. – For the purpose of this clause, the significant beneficial ownership, in case of persons other than individuals or natural persons, shall be determined as under-

(i) where the member is a company, the significant beneficial owner is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trusts, holds not less than ten per cent. share capital of the company or who exercises significant influence or control in the company through other means;

(ii) where the member is a partnership firm, the significant beneficial owner is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trusts, holds not less than ten per cent. of capital or has entitlement of not less than ten per cent. of profits of the partnership;

(iii) where no natural person is identified under (i) or (ii), the significant beneficial owner is the relevant natural person who holds the position of senior managing official;

(iv) where the member is a trust (through trustee), the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with not less than ten per cent. interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership;

Explanation 11. lt is hereby clarified that instruments in the form of global depository receipts, compulsorily convertible preference shares or compulsorily convertible debentures shall be treated as shares’ for the purpose of this clause;

2A. Duty of the reporting company

(1) Every reporting company shall take necessary steps to find out if there is any individual who is a significant beneficial owner, as defined in clause (h) of rule 2, in relation to that reporting company, and if so, identify him and cause such individual to make a declaration in Form No. BEN-1.

(2) Without prejudice to the generality of the steps stated in sub-rule (1), every reporting company shall in all cases where its member (other than an individual), holds not less than ten percent 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 subsection (5) of section0, in Form No. BEN-4

Amendment
1. Inserted by the Companies (Significant Beneficial Owners) Amendment Rules. 2019 Dated 08.02.2019

3. Declaration of significant beneficial ownership under section 90

(1) On the date of commencement of the Companies (Significant Beneficial Owners) Amendment Rules, 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.

(2) Every individual, who subsequently becomes a significant beneficial owner, or where his significant beneficial ownership undergoes any change shall file a declaration in Form No. BEN-1 to the reporting company, within thirty days of acquiring such significant beneficial ownership or any change therein.

Explanation.-Where an individual becomes a significant beneficial owner, or where his significant beneficial ownership undergoes any change, within ninety 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.]

Amendment

1. Substituted by the Companies (Significant Beneficial Owners) Amendment Rules. 2019 Dated 08.02.2019 Original Content

Original Omitted Content:-

3. Declaration of significant beneficial ownership in shares under section 90

(1) Every significant beneficial owner shall file a declaration in Form No. BEN-I to the company in which he holds the significant beneficial ownership on the date of commencement of these rules within ninety days from such commencement and within thirty days in case of any change in his significant beneficial ownership.

(2) Every individual, who, after the commencement of these rules, acquires significant beneficial ownership in a company. shall file a declaration in Form No. BEN-I to the company, within thirty days of acquiring such significant beneficial ownership or in case of any change in such ownership.

4. Return of significant beneficial owners in shares

Upon receipt of declaration under rule 3, the reporting company shall file a return in [2Form 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.]

* Circulars Related to:

1 .Relaxation of additional fees and extension of last date of filing form BEN-2 dated 06.09.2018
2.Clarification in filing BEN-1 under CA 2013 dated 10.09.2018

Amendment

1. Substituted by the Companies (Significant Beneficial Owners) Amendment Rules. 2019 Dated 08.02.2019 Original Content
2. Substituted bv the Companies (Significant Beneficial Owners) second Amendment Rules.2019 Dated 01.07.2019
   in Rule-4;
   Form No. BEN-2
   shall be substituted namely,
   Form No. BEN-2.
   Original Omitted Content:- 4. Return of significant beneficial owners in shares.
   Where any declaration under rule 3 is received by the company, it 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 declaration by it, along with the fees as prescribed in companies (Registration offices and fees) Rules, 2014.

5. Register of significant beneficial owner

(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.

6. Notice seeking information about significant beneficial owners

A company shall give notice seeking information in accordance with under sub-section (5) of Section 90, in Form No. BEN-4.

7. Application to the Tribunal

The reporting company shall apply to the Tribunal,

(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]

Amendment

1.Substituted by the Companies (Significant Beneficial Owners) Amendment Rules. 2019 Dated 08.02.2019 Original Content

Original Omitted Content:- 7. Application to the Tribunal

The company may apply to the Tribunal 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 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

8. Non-Applicability

These rules shall not be made applicable to the extent the share of the reporting company is held by,

(a) the authority constituted under sub-section (5) of section 125 of the Act;
(b) its holding reporting company:

Provided that the details of such holding reporting company shall be reported in -fForm 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) Securities and Exchange Board of India registered Investment Vehicles such as mutual funds, alternative investment lunds (AIF), Real Estate Investment Trusts (REITs), infrastructure Investment Trust (InVITs) regulated by the Securities and Exchange Board of India,

(f) Investment Vehicles regulated by Reserve Bank of India, or Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority.]

Amendment

1.Substituted by the Companies (Significant Beneficial Owners) Amendment Rules. 2019 Dated 08.02.2019 Original Content

2. Substituted by the Companies (Significant Beneficial Owners) second Amendment Rules.2019 Dated 01.07.2019

in Rule-8,

Form No. BEN-2.

shall be subtituted namely,

Form No. BEN-2.

Original Omitted Content:- 8. Non-Applicability.

These rules are not made applicable to the holding of shares of companies/body corporates, in case of pooled investment vehicles/investment funds such as Mutual Funds, Alternative Investment Funds (AIFs), Real Estate Investment Trusts(REITs), and Infrastructure Investment Trusts (lnvlTs) regulated under SEBI Act.

Annexures

1[1. Form BEN-1]
2,5[[2. Form BEN-2]]
3[3. Form BEN-3]
4[4. Form BEN-4]

Amendment

1.Substituted by the Companies (Significant Beneficial Owners) Amendment Rules, 2019 Dated 08.02.2019 Original Content

2.Substituted by the Companies (Significant Beneficial Owners) Amendment Rules, 2019 Dated 08.02.2019 Original Content

3.Substituted by the Companies (Significant Beneficial Owners) Amendment Rules, 2019 Dated 08.02.2019 Original Content

4.Substituted by the Companies (Significant Beneficial Owners) Amendment Rules, 2019 Dated 08.02.2019 Original Content

5.Substituted by the Companies (Significant Beneficial Owners) second Amendment Rules,2019 Dated 01.07.2019

in Annexure for;
FORM NO. BEN-2

shall be substituted namely,
FORM NO. BEN-2.