With the goal of increasing corporate transparency, India’s Ministry of Corporate Affairs (MCA) recently passed the Companies Significant Beneficial Owners Rules (SBO Rules) of 2018, modifying Section 90 of the Companies Act 2013.
According to the new legislation, every individual, including non-Indian persons and trustees/beneficiaries, who qualifies as a significant beneficial owner must declare themselves to their company—importantly, the original definition of “significant” beneficial ownership has been changed by the SBO Rules from a 25% shareholding to a 10% shareholding. The company must also create a beneficial ownership register that remains open to shareholders for inspection and file the information with the Registrar. (Similar to the UK guidance, individuals who have “the right to exercise significant influence or control” over a company, other than shareholders, must also be declared.) When no natural person can be defined as an SBO, the SBO should be identified as a senior manager. Regulated funds are exempt from the SBO legislation.
Every SBO is required to complete form No. BEN-1 and to the company. Once this declaration is made, the company must then file form No. BEN-2 with the Registrar, thus lodging the SBO information. Penalties for not complying can be strict, including the suspension of rights attached to shares.
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