The Amended Rules of Significant Beneficial ownership, 2019 Effective date : 08th February, 2019 MCA's step towards transparency of shareholding structures and help the government identify benami transactions and prevent money laundering activities. #Sigificantbeneficialownershipamendedrules

1. Companies (Significant
Beneficial Ownership)
Amendment Rules, 2019
FOR REFERNECE PURPOSES ONLY
ABHISHEK PATHAK | M & A – TAX & REGULATORY
Effective Date:
08th
February, 2019 (Date of publication in the Official
Gazette).

2. PAGE 1
WHAT’S THIS ABOUT?
The Ministry of Corporate Affairs (MCA) on 8th
February, 2019 being the effective date has notified
the Companies (Significant Beneficial Ownership) Amendment Rules, 2019.
These rules are amended in conjunction with the Companies (Significant Beneficial Rules), 2018
issued in June 2018 last year.
In this notification, the government has operationalized the provisions of section 90 of the
Companies Act 2013 Act.
As per the notification, every significant beneficial owner is required to make time bound disclosures
to the reporting company.
OBJECTIVE OF THE NOTIFICATION
The objective is to identify the ultimate beneficial individual orgroup of individualswho have control
or ownership of the reporting company.
KEY DEFINITIONS
1. “Reporting Company" means a company as defined under the Companies Act, 2013,
2. "Control" includes the right to appoint majority of the directors or to control the management or
policy decisions exercisable by a person or persons acting individually or in concert, directly or
indirectly, including by virtue of their shareholding or management rights or shareholder’s
agreements or voting agreements or in any other manner.
3. "Significant Beneficial Owner” in relation to a reporting company means an individual who
acting alone or together, or through one or more persons or Trust, possesses one or more of the
following rights or entitlements in such reporting company, namely:
a. holds indirectly, or together with any direct holdings, not less than 10 percent of the shares
or voting rights in the shares;
b. has right to receive or participate in not less than 10 percent of the total distributable

3. PAGE 2
dividend, or any other distribution, in a financial year through indirect holdings alone, or
together with any direct holdings;
c. has right to exercise, or actually exercises, significant influence or control, in any manner
other than through direct holdings alone.
4. "Majority Stake" means; -
a. holding more than 50 percent of the equity share capital in the body corporate; or
b. holding more than 50 percent of the voting rights in the body corporate; or
c. having the right to receive or participate in more than 50 percent of the distributable
dividend or any other distribution by the body corporate.
5. "Beneficial interest”: in a share includes, directly or indirectly, through any contract,
arrangement or otherwise, the right or entitlement of a person alone or together with any other
person, to:
a. exercise or cause to be exercised any or all of the rights attached to such share; or
b. receive or participate in any dividend or other distribution in respect of such share.
WHO IS SIGNIFICANT BENEFICIAL OWNER?
This Section covers the rules for the determination of the Significant Beneficial Ownership.
1. In the aforementioned definition of Significant beneficial owner, if an individual does not
hold any right or entitlement indirectly under clauses (a), (b) or (c), he shall not be
considered to be a significant beneficial owner.
2. In the aforementioned definition of Significant beneficial owner: - An individual shall be
considered to hold a right or entitlement directly in the reporting company, if he satisfies
any of the following criteria, namely.
(i) The shares in the reporting company representing such right or entitlement are held
in the name of the individual;
(ii) the individual holds or acquires a beneficial interest in the share of the reporting
company under subsection (2) of section 89, and has made a declaration in this
regard to the reporting company.

4. PAGE 3
(iii) 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: -
(cont.)

5. PAGE 4
S.No. Type of Member Criteria to be fulfilled by the individual
1
where the member of the reporting company is
a body corporate (whether incorporated or
registered in India or abroad), other than
limited liability partnership.
An individual who –
(a) holds majority stake in that member; or
(b) holds majority stake in the ultimate holding
company (whether incorporated or registered in
India or abroad) of that member.
2
Where the member of the reporting company is
a Hindu Undivided Family (HUF) (through
Karta).
An individual who is the Karta of the HUF.
3
Where the member of the reporting company is
a partnership entity (through itself or a
partner).
An individual who –
(a) is a partner; or
(b) holds majority stake in the body corporate,
which is a partner of the partnership entity; or
(c) holds majority stake in the ultimate holding
company of the body corporate, which is a
partner of the partnership entity.
4
Where the member of the reporting company is
a trust (through trustee).
An individual who –
(a) is a trustee in case of a discretionary trust or
a charitable trust;
(b) is a beneficiary in case of a specific trust;
(c) is the author or settlor in case of a revocable
trust.
5
Where the member of the reporting company is
a pooled investment vehicle or an entity
controlled by the pooled investment vehicle,
based in a member State of the Financial Action
Task Force on Money Laundering, and the
regulator of the securities market in such
member State is a member of the International
Organization of Securities Commissions.
An individual in relation to the pooled
investment vehicle, who –
(a) is a general partner; or
(b) is an investment manager; or
(c) is a Chief Executive Officer where the
investment manager of such pooled vehicle is a
body corporate or a partnership entity.
6
Where the member of a reporting company is a
pooled investment vehicle or an entity
controlled by the pooled investment vehicle,
based in a jurisdiction other than mentioned in
S.No. – 5 above.
An individual who belongs to any of the clauses
in (1) to (4) above.
(cont.)

6. PAGE 5
What are the obligations of the reporting company?
1. Every reporting company shall take necessary steps to find out if there is any individual who is
a significant beneficial owner, as aforementioned and explained above in relation to that
reporting company, and if so, identify him and cause such individual to make a declaration in
Form No. BEN-1.
2. Every reporting company shall in all cases where its member (other than an individual), holds
not less than ten per cent. of its: -
(a) shares, or
(b) voting rights, or
(c) right to receive or participate in the dividend or any other distribution payable in a financial
year, give notice to such member, seeking information in accordance with sub-section (5) of
section 90, in Form No. BEN-4.
What is the procedure for disclosure?
Declaration of significant beneficial ownership under section 90.- Where an individual becomes a
significant beneficial owner the disclosure/reporting requirement is as under:
Form By Whom ? To whom ? When ?
BEN-1
Every individual who is a
significant beneficial owner in
a reporting company.
Reporting company
90 days from
Commencement of the
rules.
Every individual, who
subsequently becomes a
significant beneficial owner, or
where his significant beneficial
ownership undergoes any
change
Reporting company
30 days from the date of
acquiring such significant
beneficial ownership or any
change therein.
(cont.)

7. PAGE 6
Return of significant beneficial owners in shares- Upon the receipt of the BEN – 1 from the
Significant Beneficial Owner the reporting company shall file the return as under:
Form By Whom ? To whom ? When ?
BEN-2
Reporting company Registrar of companies
30 days from the date of
receipt of such declaration
NON APPLICABILITY OF THE SBO RULES:
The SBO Rules will not apply to the extent the shares of the reporting company are
held by:
1 Investor Education and Protection Fund Authority;
2
Its holding reporting company whose details are disclosed by the reporting company
in Form BEN-2;
3 Central or state government or any local authority;
4
Reporting company / body corporate / entity controlled by the central or state government
or governments or partly by the central government and partly by one or more state
governments;
5
SEBI-registered investment vehicles such as mutual funds, Alternative Investment Funds
(AIF), Real Estate Investment Funds (Re IT), Infrastructure Investment Trust (Inv IT)
regulated by SEBI;
6 Investment Vehicles regulated by RBI, IRDAI and PFRDA.
(cont.)

8. PAGE 7
Application to the Tribunal -
The reporting company shall apply to the Tribunal -
(i) where any person fails to give the information required by the notice in Form No. BEN-
4, within the time specified therein; or
(ii) where the information given is not satisfactory, in accordance with sub-section (7) of
section 90, for order directing that the shares in question be subject to restrictions,
including –
o restrictions on the transfer of interest attached to the shares in question;
o suspension of the right to receive dividend or any other distribution in relation to
the shares in question;
o suspension of voting rights in relation to the shares in question;
o any other restriction on all or any of the rights attached with the shares in question.
Brief Synopsis of Forms:
The prescribed forms under SBO rules are as under:
Form By Whom ? To whom ? When ?
BEN-1
Declaration by the beneficial owner
who holds or acquires significant
beneficial ownership in shares:
 Every individual who is a
significant beneficial owner in a
reporting company.
 Every individual, who
subsequently becomes a
significant beneficial owner, or
where his significant beneficial
ownership undergoes any
change
Reporting company
 90 days from Commencement of
the rules.
 30 days from the date of acquiring
such significant beneficial
ownership or any change therein.
BEN-2
Reporting company Registrar of companies
30 days from the date of receipt of
such declaration
BEN-3
Register of beneficial owners holding
significant beneficial interest
N.A. N.A.

9. PAGE 8
BEN-4
Notice to member, seeking
information regarding the disclosure
of significant beneficial Ownership.
Significant Beneficial Owner
Reporting company has reasonable
cause to believe that the member is the
potential significant beneficial owner in
such reporting company
What are the Penalties for contravention?
 Failure tomake declaration, shall be punishable with imprisonment for a term which may extend
to 1 year or a fine in the range of INR 0.1 million to INR 1 million or with both and where the
failure is a continuing one, with a further fine which may extend to INR 1,000 per day of default.
 Failure on part of company to maintain registers and / or fails to file returns with the ROC or
denies inspection of the register of SBO, the company and every officer in default is punishable
with a fine in the range of INR 1 million to INR 5 million, and where the failure is a continuing
one, with a further fine which may extend to INR 1,000 for per day of default.
 Person willfully furnishes false or incorrect information, or suppresses any material
information of which the declarant was aware of in the declaration made, is liable to be
punished for ‘fraud’ under section 447 of Companies Act 2013 Act.
The disclosures relating to SBO are expected to lead to transparency of shareholding structures
andhelp the government identifybenami transactionsand prevent money launderingactivities
Even though I am tempted, ever so often, I know that the conclusion is no time to make new
points, arguments or cram facts. I make sure I’ve conveyed all the important facts in the body of
the note.
Regards
Abhishek Pathak
M & A - Tax & Regulatory
LinkedIn: - https://www.linkedin.com/in/abhishekpathak9/
Email: - abhishekpathak@outlook.in
Tel: - (+91) 95555 - 43787, (+91) 99997 - 87439

10. PAGE 9
References: Section 90 of the Companies Act, 2013
(1) Every individual, who acting alone or together, or through one or more persons or trust, including a
trust and persons resident outside India, holds beneficial interests, of not less than twenty-five per
cent. or such other percentage as may be prescribed, in shares of a company or the right to exercise,
or the actual exercising of significant influence or control as defined in clause (27) of section 2, over
the company (herein referred to as "significant beneficial owner"), shall make a declaration to the
company, specifying the nature of his interest and other particulars, in such manner and within such
period of acquisition of the beneficial interest or rights and any change thereof, as may be prescribed:
Provided that the Central Government may prescribe a class or classes of persons who shall not be
required to make declaration under this sub-section.
(2) Every company shall maintain a register of the interest declared by individuals under sub-section (1)
and changes therein which shall include the name of individual, his date of birth, address, details of
ownership in the company and such other details as may be prescribed.
(3) The register maintained under sub-section (2) shall be open to inspection by any member of the
company on payment of such fees as may be prescribed.
(4) Every company shall file a return of significant beneficial owners of the company and changes therein
with the Registrar containing names, addresses and other details as may be prescribed within such
time, in such form and manner as may be prescribed.
(5) A company shall give notice, in the prescribed manner, to any person (whether or not a member of
the company) whom the company knows or has reasonable cause to believe—
(a) to be a significant beneficial owner of the company;
(b) to be having knowledge of the identity of a significant beneficial owner or another person likely to
have such knowledge; or
(c) 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 this
section.
(6) The information required by the notice under sub-section (5) shall be given by the concerned person
within a period not exceeding thirty days of the date of the notice.
(7) The company shall—
(a) where that person fails to give the company the information required by the notice within the time
specified therein; or
(b) where the information given is not satisfactory,
apply to the Tribunal within a period of fifteen days of the expiry of the period specified in the notice,
for an order directing that the shares in question be subject to restrictions with regard to transfer of
interest, suspension of all rights attached to the shares and such other matters as may be prescribed.
(8) On any application made under sub-section (7), the Tribunal may, after giving an opportunity of being
heard to the parties concerned, make such order restricting the rights attached with the shares within
a period of sixty days of receipt of application or such other period as may be prescribed.

11. PAGE 10
(9) The company or the person aggrieved by the order of the Tribunal may make an application to the
Tribunal for relaxation or lifting of the restrictions placed under sub-section (8), within a period of one
year from the date of such order:
Provided that if no such application has been filed within a period of one year from the date of the order
under sub-section (8), such shares shall be transferred, without any restrictions, to the authority constituted
under sub-section (5) of section 125, in such manner as may be prescribed;]]
(10) If any person fails to make a declaration as required under sub-section (1), he shall be
punishable 6[4[with imprisonment for a term which may extend to one year or]] with fine which shall
not be less than one lakh rupees but which may extend to ten lakh rupees 6[4[or with both]] and
where the failure is a continuing one, with a further fine which may extend to one thousand rupees
for every day after the first during which the failure continues.
(11) If a company, required to maintain register under sub-section (2) and file the information under sub-
section (4), fails to do so or denies inspection as provided therein, the company and every officer of
the company who is in default shall be punishable with fine which shall not be less than ten lakh
rupees but which may extend to fifty lakh rupees and where the failure is a continuing one, with a
further fine which may extend to one thousand rupees for every day after the first during which the
failure continues.
(12) If any person willfully furnishes any false or incorrect information or suppresses any material
information of which he is aware in the declaration made under this section, he shall be liable to
action under section 447.]
Amendments
Substituted by the Companies (Amendment) Act,2017 - Amendment Effective From 13th
June 2018
For section 90
Where it appears to the Central Government that there are reasons so to do, it may appoint one or more
competent persons to investigate and report as to beneficial ownership with regard to any share or class of
shares and the provisions of section 216 shall, as far as may be, apply to such investigation as if it were an
investigation ordered under that section.
The following section shall be substituted, namely: -
(1) Every individual, who acting alone or together, or through one or more persons or trust, including a
trust and person’s resident outside India, holds beneficial interests, of not less than twenty-five per cent.
or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the
actual exercising of significant influence or control as defined in clause (27) of section 2, over the company
(herein referred to as "significant beneficial owner"), shall make a declaration to the company, specifying
the nature of his interest and other particulars, in such manner and within such period of acquisition of
the beneficial interest or rights and any change thereof, as may be prescribed: Provided that the Central
Government may prescribe a class or classes of persons who shall not be required to make declaration
under this sub-section.
(2) Every company shall maintain a register of the interest declared by individuals under sub-section (1)
and changes therein which shall include the name of individual, his date of birth, address, details of
ownership in the company and such other details as may be prescribed.
(3) The register maintained under sub-section (2) shall be open to inspection by any member of the
company on payment of such fees as may be prescribed.

12. PAGE 11
(4) Every company shall file a return of significant beneficial owners of the company and changes therein
with the Registrar containing names, addresses and other details as may be prescribed within such time,
in such form and manner as may be prescribed.
(5) A company shall give notice, in the prescribed manner, to any person (whether or not a member of the
company) whom the company knows or has reasonable cause to believe—
(a) to be a significant beneficial owner of the company;
(b) to be having knowledge of the identity of a significant beneficial owner or another person likely to
have such knowledge; or
(c) 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 this
section.
(6) The information required by the notice under sub-section (5) shall be given by the concerned person
within a period not exceeding thirty days of the date of the notice.
(7) The company shall, —
(a) where that person fails to give the company the information required by the notice within the time
specified therein; or
(b) where the information given is not satisfactory,
apply to the Tribunal within a period of fifteen days of the expiry of the period specified in the notice, for
an order directing that the shares in question be subject to restrictions with regard to transfer of interest,
suspension of all rights attached to the shares and such other matters as may be prescribed.
(8) On any application made under sub-section (7), the Tribunal may, after giving an opportunity of being
heard to the parties concerned, make such order restricting the rights attached with the shares within a
period of sixty days of receipt of application or such other period as may be prescribed.
(9) The company or the person aggrieved by the order of the Tribunal may make an application to the
Tribunal for relaxation or lifting of the restrictions placed under sub-section (8).
(10) If any person fails to make a declaration as required under sub-section (1), he shall be punishable with
fine which shall not be less than one lakh rupees but which may extend to ten lakh rupees and where the
failure is a continuing one, with a further fine which may extend to one thousand rupees for every day
after the first during which the failure continues.
(11) If a company, required to maintain register under sub-section (2) and file the information under sub-
section (4), fails to do so or denies inspection as provided therein, the company and every officer of the
company who is in default shall be punishable with fine which shall not be less than ten lakh rupees but
which may extend to fifty lakh rupees and where the failure is a continuing one, with a further fine which
may extend to one thousand rupees for every day after the first during which the failure continues.
(12) If any person willfully furnishes any false or incorrect information or suppresses any material
information of which he is aware in the declaration made under this section, he shall be liable to
action under section 447.
(3) Substituted by the Companies (Amendment) Ordinance,2018 dated 02.11.2018

13. PAGE 12
In section 90 for sub-section (9),
The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal
for relaxation or lifting of the restrictions placed under sub-section (8).
the following sub-section shall be substituted, namely: -
(9) The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal
for relaxation or lifting of the restrictions placed under sub-section (8), within a period of one year from the
date of such order:
Provided that if no such application has been filed within a period of one year from the date of the order under
sub-section (8), such shares shall be transferred to the authority constituted under sub-section (5) of section
125, in such manner as may be prescribed;
4.Inserted by the Companies (Amendment) Ordinance,2018 dated 02.11.2018
5.Substituted by the Companies (Amendment) Ordinance,2019 dated 14.01.2019 [Companies
(Amendment) Ordinance 2018 is repealed on 12th January 2019]
In section 90 for sub-section (9),
The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal for
relaxation or lifting of the restrictions placed under sub-section (8), within a period of one year from the date
of such order:
Provided that if no such application has been filed within a period of one year from the date of the order under
sub-section (8), such shares shall be transferred to the authority constituted under sub-section (5) of section
125, in such manner as may be prescribed;
the following sub-section shall be substituted, namely: -
"The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal
for relaxation or lifting of the restrictions placed under sub-section (8), within a period of one year from the
date of such order:
Provided that if no such application has been filed within a period of one year from the date of the order under
sub-section (8), such shares shall be transferred, without any restrictions, to the authority constituted under
sub-section (5) of section 125, in such manner as may be prescribed"
6.Inserted by the Companies (Amendment) Ordinance,2019 dated 14.01.2019 [Companies
(Amendment) Ordinance 2018 is repealed on 12th January 2019]
Exception/ Modification/ Adaptation
1. In case of Government company - Section 90 shall not apply. - Notification dated 5th June, 2015.