Regulatory Alert: MCA amends Companies (Significant Beneficial Owners) Rules, 2018
12 February 2019
The Ministry of Corporate Affairs (‘MCA’) vide a Notification dated 8 February 2019 (‘MCA Notification’) has introduced Companies (Significant Beneficial Owners) Amendment Rules, 2019 (“Amendment Rules”) to bring in more clarity on the extant framework of Companies (Significant Beneficial Owners) Rules, 2018 (“Rules”).
This Alert provides an overview of the provisions of the Amendment Rules which impacts provisions of Significant Beneficial Owners under the Companies Act, 2013 (“the Act”) and rules thereof.
Key highlights of the Amendment Rules:
- The Amendment Rules provides a new definition of “significant beneficial owner” (“SBO”). The determination of individual as SBO is now based on direct and indirect holding of right or entitlement in the reporting entity. The Amendment Rules lays down the instances where an individual can be said to have direct or indirect holding of any right or entitlement in the reporting company.
- The Amendment Rules has introduced few important definitions such as reporting company, control, majority stake.
- The Amendment Rules provides for exemption from the reporting obligations to certain class of entity(s).
- Individual(s) falling within the purview of SBO should disclose the significant beneficial ownership to the reporting entity in Form BEN-1 within 90 (ninety) days from the date of commencement of the Amendment Rules (to be notified in Official Gazette) and within 30 (thirty) days in case of fresh acquisition or change in SBO.
- The reporting company shall report the disclosure of significant beneficial ownership received from SBO, to Registrar of Companies (“ROC”) in Form BEN-2, within 30 (thirty) days of receipt of the said declaration .
- Individual falling within the purview of SBO shall be required to report the significant beneficial ownership to the reporting company on or before 8 May 2019*.
- Every reporting company shall be then required to report the aforesaid declaration of significant beneficial ownership on or before 7 June 2019* to the ROC.
*Assuming that the Companies (Significant Beneficial Owners) Amendment Rules, 2019 are effective from 8 February 2019.
- Penalties in case of non-compliances:
- If SBO fails to make a declaration, the SBO shall be punishable with imprisonment for maximum 1 year or fine not less than INR 1 lakh but which may extend to INR 10 lakhs or with both and for continuing failure with a further fine which may extend to INR 1000/- for every day after the first during which the failure continues.
- If a company fails to maintain registers and / or fails to file returns with the ROC or denies inspection of the register of SBO, the company and every officer in default shall be punishable with a fine not less than INR 10 lakhs but which may extend to INR 50 lakhs and for continuing failure with a further fine which may extend to INR 1000/- for every day after the first during which the failure continues.
- If any person wilfully furnishes any false or incorrect information or suppresses any material information of which he is aware in the declaration, the person shall be liable for punishment for ‘fraud’ under section 447 of the Act.