Analysis on Companies (Significant Beneficial owners) Amendment Rules, 2019

Analysis on Companies (Significant Beneficial owners) Amendment Rules, 2019

We analyzed SBO Rules, and the main highlights of the same are as under:

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a) Effective Date: 08^th February 2019

b) Who is Significant Beneficial owner : Any Individual, who acting alone or together, or through one or more persons, or trust, holds indirectly or together with any direct holdings,

· not less than 10% of the shares or voting rights in a company or

· a right to receive and participate in not less than 10% of the total distributed dividend or any other distribution or

· has a right to exercise significant influence and control.

An individual shall be considered to hold a right or entitlement indirectly, if he satisfied the following criteria:

In case the member of reporting Co. is body corporate (whether incorporated in India or not) other than LLP, and the individual holds majority stake in that member or its ultimate holdin
In case the member of reporting Co. is HUF, and the individual is Karta
In case the member of reporting Co. is partnership, and the individual is either partner, or holds majority stake in body corporate (or in its ultimate holding Co.) which is a partner in Partnership firm.

Process

Step-1 Rule 2A (1) and 3(1)

Every reporting company shall take necessary steps to find out if there is any individual who is a significant beneficial owner and if so, identify him and cause such individual (By Giving Notice in form BEN-4) to make a declaration in Form No. BEN-1 to the Company Within 90 Days from such commencement i.e till 08^th May 2019

Rule 2A (2)

In case Company has member other than individual, who holds less than 10% of shares/voting rights/Right to participate in dividend give notice to such member in BEN-4

Step-2 Rule 4

Upon receipt of declaration under rule 3, the reporting company shall file a return in Form No. BEN-2 with the Registrar in respect of such declaration, within a period of 30 Days from the date of receipt of such declaration by it.

Step-3 Rule 5

The company shall maintain a register of significant beneficial owners in Form No. BEN-3.

Consequences of not giving the information to the company by the SBO or the information given are not satisfactory. (Rule 7)

The Company may apply to the Tribunal within a period of 15 Days of the expiry of the period specified in the notice, for an 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;

(d) Any other restriction on all or any of the rights attached with the shares in question.

Non Applicability of the Companies (Significant Beneficial owners) Amendment Rules, 2019 (Rule 8)

The rules are not applicable to the extent the shares of the reporting company is held by :

IEPF authority;
its holding reporting company, however, the details of such holding reporting company shall be reported in Form No. BEN-2;
the Central Government, State Government or any local Authority;
reporting company; or a body corporate; or an entity, controlled by the Central Government or by any Stare Government or Governments or partially by the Central Government and partly by one or more State Governments;
SEBI 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;
Investment Vehicles regulated by Reserve Bank of India, or Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority.