Monday, 5 August 2019

SIGNIFICANT BENEFICIAL OWNER “SBO”, BEN-2 DATE EXTENDED TO 30.9.19

Summary

To curb the menace of black money and round tripping of funds, the Ministry has introduced many measures to send a strong message to the existing companies. One of the initial steps by the MCA was to strike off Companies which have not been filing their financial statements for a period of 2 or more years. 
A recent measure taken by the MCA in this regard is to get information about the ultimate individual beneficial shareholder of a company. The Ministry in this regard had ammended the provisions of Section 90 of the Companies Act 2013 and notified it on 13th June, 2018. Through this notification a step has been taken by the Ministry to reveal legitimate individual owner hiding behind anonymity and layers of shell Companies.
Legal Provisions
The amended provision governing “Significant Beneficial Owner” (section 90) herein after referred to as “SBO” under the Companies Act, 2013 (hereinafter referred to as “ACT”) has been made effective from 13.06.2018 and major highlights of these provisions have been enumerated below.
Who is Significant Beneficial Owner (SBO) ?
Any person (singly or along with other person including trust and person’s resident outside India) shall become SBO with respect to shares in a company if:
Condition 1ANDCondition 2
Any 1 condition of the following:
  1. holds 10% or more shares in the company; OR
  2. the right to exercise, or the actual exercising of significant influence; OR
  3. Control as defined in clause (27) of section 2.
I.            Whose name is not entered in the register of members as a shareholder of the company.


Individuals (natural person) fulfilling the conditions specified above are termed as “SBO” of the Company. In cases where member of the company is not a natural person, the significant beneficial holder shall be:
  1. In case such member is a Company, natural person who either at his own or along with other natural person holds not less than 10% of the share capital of the company.
  2. In case such member is a partnership firm, natural person who at his own or along with other natural person holds not less than 10% of capital or has entitlement of profits of the partnership.
If there is no natural person meeting above conditions, the SBO is the relevant natural person who holds the position of senior managing official.
Compliance required on part of “SBO”
The Compliances required on part SBO have been enumerated below:
  1. SBO is required to give declaration to the Company in form BEN-1.
  2. SBO is required to give declaration within 90 days from the Commencement date (13.06.2018). Therefore, last date for declaration of such significant shareholding is 10.09.2018.
  3. In case an individual becomes SBO after the Commencement of these rules or any changes occur in such ownership then declaration will be required within 30 days from the acquisition or such change.
  4. Any failure to comply with the disclosure requirement in the form of declaration will attract minimum fine of INR 100,000/- which may extent to INR 10 lakhs. In addition to this, per day penalty of INR 1000 will also be applicable for each day of continuing default.
Compliance required on part of “Company”:
The Compliances required on part of Company have been enumerated below:
  1. The Company is required to file such declaration as received from a SBO within 30 days from the receipt, in form No.BEN-2 to the Registrar of Companies along with the fees as prescribed in Companies (Registration offices and fees) Rules, 2014.
  2. The Company is also required to maintain register for such declarations received from SBO in the format prescribed in form BEN-3.
  3. The company is made liable to send notice (BEN-4) for obtaining declaration from the SBO in case where suo motto declaration has not been received.
  4. In case even after sending of notice, declaration from the SBO has not been received, then the company is mandatorily required to move an application to the Tribunal (NCLT).
  5. Any failure shall attract penalty of INR1million which may extent to INR 5million on the Company and every officer who is default. In addition to this, per day penalty of INR 1000 will also be applicable for each day of continuing default.
Conclusion:    
From the above, it can be concluded that these stringent additions in the provisions of the Law are to find out who is actual owner. Which person is owned controls the company behind the wall. It`s means direct holding not be considered as SBO, indirectly holding through one more intermediary by Individual may be considered as SBO.
E.g.
Mr. A directly/ indirectly own shares of H ltd or through H ltd in S ltd. Not be treated as SBO.
E.g. Mr. F share hold 10% or more shares in ultimate foreign holding company, for which subsidiary operates in India. Mr. F may be considered as SBO. Indian company required to report in BEN-2.
E.g. A Japanese company operates in India 100% shares hold by holding company, and there is no individual hold any significant shares till ultimate company. So it may be case, senior person of the company whose decision play a vital roll in the company, can be treated as SBO..
Thanks & Regards
CA. Ashwani Rastogi
Partner, ARJS & Associates
M.Com, FCA, ACS, FAFD
Chartered Accountants 
​​​011-42137042, +91 9990999281
Office:- 2029, Bank Street, Karol Bagh, 

New Delhi 110005 (India)

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