MCA introduced Companies Significant Beneficial Owners Amendment Rules 2019

The Ministry of Corporate Affairs (“MCA”), vide their notification dated 8^th February, 2019 have introduced the Companies (Significant Beneficial Owners)Amendment Rules, 2019, to amend the Companies (Significant Beneficial Owners) Rules,2018

The analysis of this amendment is presented herewith:-

Rule 3 and Rule 4 have been substituted with new Rule 2A, 3 and 4 which states that

Ø  Rule 2A cast an obligation on reporting company, to identify the significant beneficial owner in relation to that reporting company and cause him to make declaration in Form No. BEN 1

Also the reporting company is required to give notice to members holding not less than 10% shares/voting rights/ right to receive or participate in the dividend or any other distribution payable in a financial year, to provide information under Section 90(5) in Form No BEN-4

Ø  Now Rule 3 states that every individual who is a significant beneficial owner in a reporting company shall file a declaration in Form No. BEN-1 to the reporting company within 90 days i.e. by 9^th May 2019 of commencement of the Companies (Significant Beneficial Owners) Amendment Rules, 2019 (for person who already have beneficial interest in the shares of a company)

And if any person subsequently becomes a significant beneficial owner or his interest undergoes any change then he shall file about such change or acquisition of beneficial interest within 30 days in Form No. BEN-1 to the reporting company

It is hereby clarified that if any person becomes significant beneficial owner or his interest undergoes any change within the period of 90 days from commencement of this notification, it shall be deemed that such individual became the significant beneficial owner or any change therein happened on the date of expiry of 90 days i.e. (9^th May 2019) from the date of commencement of said rules, and the period of 30 days for filing will be reckoned accordingly

Ø  Rule 4 has no change, the crux being same that on receipt of declaration under rule 3 by the company, the company shall file Form No. BEN-2 with the registrar within 30 days

Old content of Rule 3 and Rule 4 3. Declaration of significant beneficial ownership in shares under section 90 (1) Every significant beneficial owner shall file a declaration in Form No. BEN-I to the company in which he holds the significant beneficial ownership on the date of commencement of these rules within ninety days from such commencement and within thirty days in case of any change in his significant beneficial ownership. (2) Every individual, who, after the commencement of these rules, acquires significant beneficial ownershin in a company. shall file a declaration in Form No. BEN-I to the company, within thirty days of acquiring such significant beneficial ownership or in case of any change in such ownership. 4. Return of significant beneficial owners in shares. Where any declaration under rule 3 is received by the company, it shall file a return in *Form No. BEN-2 with the Registrar in respect of such declaration, within a period of thirty days from the date of receipt of declaration by it, along with the fees as prescribed in companies (Registration offices and fees) Rules, 2014.

Rule 7 and Rule 8 have been substituted with new Rule 7 and 8 which states that

Ø  Rule 7 allows the reporting company to apply to the Tribunal to

                                 i.            restrict the transfer of interest attached to the shares;

                                ii.            suspend the right to receive dividend or any other distribution;

                              iii.            suspend the voting rights; and

                              iv.            any other restriction on all or any of the rights attached with the shares;

For the shares of the person who fails to give the information required by the notice in Form No. BEN-4 or where the information given is not satisfactory

Ø  Rule 8 states that these rules shall not be made applicable to the extent of shares of the reporting company if such shares are held by

                                 i.            the authority constituted under sub-section (5) of section 125 of the Act

                                ii.            its holding reporting company: Provided that the details of such holding reporting company shall be reported in Form No. BEN-2

                              iii.            the Central Government, State Government or any local Authority

                              iv.            A reporting company, or

A body corporate

An entity

Controlled by the Central Government or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments;

                                v.            Securities and Exchange Board of India 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,

                              vi.            lnvestment Vehicles regulated by Reserve Bank of India, or Insurance Regulatory and Development Authority of India, or Pension Fund Regulatory and Development Authority

Old content of Rule 7 and Rule 8 7. Application to the Tribunal The company may apply to the Tribunal in accordance with sub-section (7) of section 90, for 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; (c) suspension of voting rights in relation to the shares in question; (d) any other restriction on all or any of the rights attached with the shares in question 8. Non-Applicability. These rules are not made applicable to the holding of shares of companies/body corporate, in case of pooled investment vehicles/investment funds such as Mutual Funds, Alterative Investment Funds (AIFs), Real Estate Investment Trusts(REITs) and Infrastructure Investment Trusts (lnvlTs) regulated under SEBI Act.

We have some shuffling/new additions in the definition part also, i.e. Rule 2, while there are some new definitions added and some have been reshuffled

The definitions can be extracted from

http://ebook.mca.gov.in/notificationdetail.aspx?acturl=6CoJDC4uKVUR7C9Fl4rZdatyDbeJTqg3AfHMBz8Fa7EO5fq6dR5iLUD/czKFhHue4cq9RHLCvYUjq4ZHrHwfIQw2w931zIUz2Z0vyWSLUiU=

Old content of Rule 2 (b) "form" means the form specified in Annexure to these rules; (c) "registered owner" means a person whose name is entered in the register of members of a company as the holder of shares in that company but who does not hold beneficial interest in such shares; (d) "section" means a section of the Act (e) "significant beneficial owner" means an individual referred to in sub-section (1) of section 90 (holding ultimate beneficial interest of not less than 10%) read with sub-section [10] of section 89, but whose name is not entered in the register of members of a company as the holder of such shares, and the term 'significant beneficial ownership' shall be construed accordingly; Explanation l. - For the purpose of this clause, the significant beneficial ownership, in case of persons other than individuals or natural persons, shall be determined as under- (i) where the member is a company, the significant beneficial owner is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trusts, holds not less than 10% Share capital of the company or who exercises significant influence or control in the company through other means; (ii) where the member is a partnership firm, the significant beneficial owner is the natural person, who, whether acting alone or together with other natural persons, or through one or more other persons or trusts, holds not less than 10% of capital or has entitlement of not less than 10% of profits of the partnership; (iii) where no natural person is identified under (i) or (ii), the significant beneficial owner is the relevant natural person who holds the position of senior managing official; (iv) where the member is a trust  (through trustee), the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with not less than 10% interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership; Explanation 2.  lt is hereby clarified that instruments in the form of global depository receipts, compulsorily convertible preference shares or compulsorily convertible debentures shall be treated as shares' for the purpose of this clause;

FAQs

Ø  Is any mandatory obligation casted on the reporting company regarding declaration of beneficial interest?

Yes, Rule 2A cast an obligation on reporting company, to identify the significant beneficial owner in relation to that reporting company and cause him to make declaration in Form No. BEN 1

Ø  Mr. A, acquired beneficial interest in XYZ limited on following dates, the last date by which reporting needs to be done is tabled along

S.no	Date of Acquiring interest	Last date to report such interest	Reporting to be made by	Reporting to be made to
1.	31st December, 2018	9th May 2019 (90 Days)	Individual Acquiring Interest	Reporting Company
2.	3rd January, 2019	9th May 2019 (90 Days)	Individual Acquiring Interest	Reporting Company
3.	8th February, 2019	9th May 2019 (90 Days)	Individual Acquiring Interest	Reporting Company
4.	25th February, 2019	8th June 2019 (within 90 days, so 9th May, 2019 + 30 Days)	Individual Acquiring Interest	Reporting Company
5.	5th March, 2019	8th June 2019 (within 90 days, so 9th May, 2019 + 30 Days)	Individual Acquiring Interest	Reporting Company
6.	9th May, 2019	8th June 2019 (within 90 days, so 9th May, 2019 + 30 Days)	Individual Acquiring Interest	Reporting Company
7.	11th May, 2019	10th June 2019 (within 30 Days )	Individual Acquiring Interest	Reporting Company
8.	20th May, 2019	19th June 2019 (within 30 Days )	Individual Acquiring Interest	Reporting Company

Ø  What if you acquire beneficial interest or undergo any change of such interest after 90 days of commencement of this rule?

Then you have to file declaration within 30 days of such change .

Ø  What if you acquire any interest or there is any change in the beneficial interest within the period of 90 days?

Then your date of acquisition of such change or change in interest will be deemed to be occurred on the expiry of 90^th day and 30 days of reporting will be counted accordingly .

Ø  What would be your answer if you already acquired beneficial interest before commencement of this rule?

Then you need to report such acquisition before expiry of 90 days of commencement of this rule.

Ø  Within how much time the company needs to report about such declaration to the registrar?

Within 30 days of receipt of declaration from the concerned individual.

A table for relevant forms for easy reference is provided herewith

Form Number	Relevance	To be filled/issued by	To be filled to
BEN 1	Declaration of significant beneficial ownership in shares	Significant beneficial owner	Company in which he holds the significant beneficial ownership
BEN 2	Return of Declaration received by the company	Reporting Company	Registrar
BEN 3	Register of significant beneficial owners	-	-
BEN 4	Notice seeking information in accordance with under sub-section (5)  of section 90	Reporting Company	Any person (whether or not a member of the company) ü  a significant beneficial owner of the company ü  having knowledge of the identity of a significant beneficial owner or another person likely to have such knowledge; ü  to have been a significant beneficial owner of the company at any time during the three years immediately preceding the date on which the notice is issued, And who is not registered as a significant beneficial owner with the company as required under section 90.