Disclosure of Significant Beneficial Ownership
In an effort to enhance corporate transparency and combat financial malpractices like money laundering and benami transactions, Indian law mandates the identification and disclosure of Significant Beneficial Owners (SBOs). This critical compliance requirement helps to unmask the true individuals who ultimately control or significantly influence a company, even if their ownership is indirect. At Account Assure, a leading Financial Audit Firm, we provide expert guidance and support to ensure your company meticulously identifies, verifies, and reports its Significant Beneficial Owners, guaranteeing full compliance with MCA regulations.
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What is Significant Beneficial Ownership (SBO)?
A Significant Beneficial Owner (SBO) is an individual who, acting alone or together with other persons or trusts, holds certain rights or entitlements in a reporting company, where the name of the individual does not appear in the company’s register of members.
As per Section 90 of the Companies Act, 2013, read with the Companies (Significant Beneficial Owners) Rules, 2018 (and subsequent amendments), an SBO is an individual who holds indirectly, or together with any direct holdings, at least one of the following in a reporting company:
- Not less than 10% of the shares.
- Not less than 10% of the voting rights in the shares.
- The right to receive or participate in not less than 10% of the total distributable dividend, or any other distribution.
- The right to exercise or actually exercises significant influence or control over the company, in any manner other than through direct holdings alone.
Direct Holding
Means any person (individual) satisfy any of the following criteria i.e. holding shares of the company
- On his own name and his name appeared in the Register of Member of the reporting company,
- If any individual (Beneficial Owner) who holds or acquires a beneficial interest in the shares of the reporting company under sub-section (2) of section 89, and has made a declaration in Form MGT-5 in this regard to the reporting company. Further, he will be treated as the member of the company.
Indirect Holding
If name of the Individual is not appeared in the Register of Members of the reporting Company. Further, 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: –
In case the Member of Reporting Company is any Body Corporate (Whether Incorporated Or Registered In India Or Abroad)
The individual, –
- Holds Majority Stake* in that member; or
- Holds Majority Stake* in the ultimate holding company (whether incorporated or registered in India or abroad) of that member;
In case the Member of Reporting Company is any Hindu Undivided Family (Huf) (through Karta)
The individual is the Karta of the HUF.
In case the Member of Reporting Company is any Partnership Entity (Through itself or A Partner)
The individual, –
- Is a partner; or
- Holds majority stake in the body corporate which is a partner of the partnership entity; or
Holds majority stake in the ultimate holding company of the body corporate which is a partner of the partnership entity.
In case the Member of Reporting Company is any Trust (Through Trustee) The individual, –
- is a trustee in case of a Discretionary Trust or a Charitable Trust;
- is a beneficiary in case of a Specific Trust;
- is the author or settlor in case of a Revocable Trust?
In case the Member of Reporting Company is
(a) A Pooled Investment Vehicle (i.e Mutual Fund, Venture Captital Fund, etc.) ; or
(b) An Entity Controlled by the Pooled Investment Vehicle,
based in member State of the FATF on Money Laundering and the regulator of the securities market in such member State is a member of the IOSCO.
Further, the individual in relation to the Pooled Investment Vehicle is
- A General Partner; or
- An Investment Manager; or
- A CEO where the Investment Manager of such pooled vehicle is a Body Corporate or a Partnership entity.
Key Obligations & Filings Related to SBO
The SBO compliance framework involves responsibilities for both the individual SBO and the Reporting Company:
1. SBO's Declaration (Form BEN-1):
- Every individual who is a Significant Beneficial Owner in a reporting company must file a declaration in Form BEN-1 to the company, specifying the nature of their interest and other particulars.
- This declaration must be made within 30 days of acquiring SBO status or any change therein.
2. Company's Obligation to Identify SBOs (Form BEN-4)
- Every reporting company is obligated to take necessary steps to identify its SBOs.
- If a company’s member (other than an individual) holds not less than 10% of its shares, voting rights, or right to receive dividends, the company must issue a notice in Form BEN-4 to that member, asking them to provide information about their SBOs.
3. Company's Filing with ROC (Form BEN-2):
- Upon receipt of the declaration in Form BEN-1 from an SBO, the reporting company must file a return in Form BEN-2 with the Registrar of Companies (ROC).
- This filing must be done within 30 days from the date of receipt of the BEN-1 declaration by the company.
- Form BEN-2 details the SBO, their SBO ID (if applicable), and the nature of their indirect holding.
4. Maintenance of Register of SBOs (Form BEN-3)
- Every company is required to maintain a Register of Significant Beneficial Owners (SBOs) in Form BEN-3 at its registered office. This register should include the individual’s name, date of birth, address, ownership details, and other prescribed particulars.
- The register must be available for inspection.
How Account Assure Ensures Flawless SBO Compliance:
As your trusted Financial Audit Firm, Account Assure provides specialized and meticulous support for all aspects of Significant Beneficial Ownership compliance:
1. SBO Identification & Analysis:
We conduct a thorough analysis of your company’s ownership structure (including direct and indirect holdings through corporate layers, trusts, etc.) to accurately identify all potential SBOs as per the rules.
2. Drafting & Issuance of Notices (BEN-4):
Preparation and assistance in issuing notices in Form BEN-4 to relevant members to gather necessary SBO information.
3. Collection & Review of SBO Declarations (BEN-1):
- Guidance to SBOs on preparing and submitting their declarations in Form BEN-1 to the company.
- Review of submitted BEN-1 forms for accuracy and completeness.
4. Preparation & Filing of Form BEN-2
Expert preparation and accurate online submission of Form BEN-2 to the Ministry of Corporate Affairs (MCA) within the stipulated 30-day deadline.
5. Maintenance of SBO Register (BEN-3):
Assistance in maintaining the statutory Register of Significant Beneficial Owners in Form BEN-3 at your company’s registered office.
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