Declaration of Beneficial Interest - BEN-1 Filing

 INTRODUCTION

Tax evasion, corruptions, money laundering, benami transactions and insider dealings are some major problems which our economy is facing and to curb these practices MCA (Ministry of Corporate Affairs) has introduced a new concept whereby declaration of beneficial interest is required by corporate vehicles. The corporate vehicles such as companies, partnership firms, trusts and other legal persons are used for conducting unlawful practices. And for this MCA issued the notification on 13thJune, 2018 in which Companies (Significant Beneficial Owners) Rules, 2018 are introduced which are applicable from the date of notification.

These rules are brought with the purpose to bring transparency and to have the proper record in their register as who is the real owner and having a beneficial interest in the entity. These rules enhance transparency by procuring information regarding beneficial interest from beneficial owners - who are the actual source of such corporate vehicles. Availability of adequate and timely information from MCA ultimately helps the authorities in conducting an investigation by identifying those persons who are actually responsible for fraudulent or illegal activities in the concern.

Now let’s discuss the terminologies which are relevant for understanding these rules.
 

Who is Registered Owner?

Registered owner means a person:

• Whose name is entered in the register of members as holder of shares of a company and
• Who does not hold beneficial interest in such shares.
   

Who is Significant Beneficial Owner (SBO)?

Basically, if we talk in normal terms beneficial owners are those who does not hold shares directly in a company and that is why their name is not entered in the register of members of a company. They are the real owners of shares as they have right to enjoy the benefits attached with such shares and is entitled to receive and participate in the dividends and other distribution like Bonus shares, right offer etc.

As per Sec 90(1) it means an individual:

• Holding the ultimate beneficial interest of not less than 10% and
• Whose name is not entered in the register of members as holder of shares of a company.

Further, if SBO is not an individual or natural person then SBO shall mean:

Which securities are covered for the purpose of SBO?

Equity shares, compulsorily convertible preference shares, compulsorily convertible debentures and global depository receipts (GDR).
 

Who do not fall under these rules?

Compliances for giving declaration shall not be required for holding shares of following companies which are regulated under SEBI Act:

• Mutual Funds
• Alternative Investment Funds (AIFs)
• Real Estate Investment Trusts (REITs)
• Infrastructure Investment Trusts (InvITs)  
                                                       

What is Form No# BEN-1?

• Under Form No# BEN-1, declaration regarding significant beneficial ownership in shares is required by SBO.
• SBO shall file such declaration to the company in which he is having significant beneficial ownership (on the date of commencement of such rules) within 90 days from such commencement.
• If there is any change in significant beneficial ownership, then declaration for the same shall be filed within 30 days of such change.
• If any individual acquires significant beneficial ownership on or after 13th June,2018 (date of commencement) then he shall file the declaration to the company within 30 days of such acquisition.
   

What is Form No# BEN-2?

• Form No# BEN-2 is a return filed by Company to Registrar.
• Company after receiving From No# BEN-1 from SBO, shall file to Registrar in Form No# BEN-2 within 30 days of receipt of the return declaration from SBO along with prescribed fees.
   

What is Form No# BEN-3?

• The company shall be required to maintain a register of SBO in Form No# BEN-3.
• This register can be opened for inspection by any member of the company on payment of fees specified by company, which shall not exceed Rs. 50 for each inspection.
• Such an inspection can be made during business hours only, which shall not be less than 2 hours on every working day.
   

What is Form No# BEN-4?

Under Form No# BEN-4, a notice shall be given by company to any person for seeking information regarding significant beneficial ownership if company has reasonable cause to believe that:

• To be SBO
• Having knowledge regarding the identity of SBO or another person likely to have such knowledge.
• Have been SBO of the company at any time during the 3 years immediately preceding the date on which notice is issued & who is not registered with the company.

The reply of such notice shall be given by such person within 30 days of such notice.

What are the powers of the company to apply to Tribunal?

If the person fails to give reply of Form No# BEN-4 within time as specified above, then the company shall apply to the tribunal within 15 days of such failure. The company shall apply for order directing restriction on shares in question as:

• Restriction on transfer of shares and interest attached with such shares.
• Suspension of right to receive dividend.
• Suspension of voting rights.

Further, if person is aggrieved with such order then he shall also make an application to tribunal.
 

What are the penalties for non-compliances by Company and SBO?

For SBO- If declaration in Form No# BEN-1 is not made by SBO, then fine up to Rs. 1 Lakh can be imposed. And in case of continuation for 1 year extension of fine for Rs 1000 per day can be imposed.

For Company- If declaration in Form No# BEN-2 is not made by company, then fine up to Rs 10 Lakhs to Rs 50 Lakhs on defaulting officer can be imposed. And in case of continuation for 1 year extension of fine for Rs 1000 per day can be imposed.

If your queries are still unanswered or you require our assistance in getting these declarations done, then kindly contact us on info@hubco.in or click here.