Amendment in Companies (Significant Beneficial Owners) Rules, 2018 Rules

The Ministry of Corporate Affairs (MCA) has amended the Companies (Significant Beneficial Owners) Rules, 2018 vide notification dated 8 Feb, 2019. The highlights of the same are as follows:

1. Significant Beneficial Owner:  The definition of Significant Beneficial Owner (SBO) has been made clear so as to avoid confusions of earlier definition. Pursuant to the revised definition, SBO in relation to a reporting company [1] means an individual referred to in section 90(1) of the Companies Act, 2013,  who acting alone or together or through one or more persons or trust possess the following rights/entitlements in reporting company

• Holds indirectly or together with direct holding 10 % or more shares/voting rights
• Right to receive or participate in distributable dividend  or other distributable – 10% or more in a financial year  indirectly or together with direct holding
• Exercises or has Right to exercise significant influence [2] or control in any manner other than direct holdings alone

2. Holding a right or entitlement indirectly:  An individual shall be considered to hold a right or entitlement indirectly in the reporting company, if the individual satisfies any of the following criteria if the member in the reporting is :

Sr. No	Type of Member of the Reporting entity	Which individual shall be said to be holding a right or entitlement indirectly (i.e., who will be considered as SBO)?
1.	Member is an Indian or foreign body corporate (other than LLP)	Such individual (acting together[3]  with any other individuals) who (a) holds majority stake [4]  in that member; or (b) holds majority stake (as explained in footnote) in the ultimate holding company (whether incorporated or registered in India or abroad) of that member; shall be said to have indirect holding in reporting Company.
2.	Member is an Hindu Undivided Family	Karta of such HUF
3.	Member is an partnership firm or Limited Liability Partnership (LLP)	·   Each Individual Partner (irrespective of his % of contribution or % of voting rights or profit sharing ratio) ·     In case of bodies corporate partner - such individual (acting together  with any other individuals) who (a) holds majority stake  (as explained in footnote above in that partner body corporate; or (b) holds majority stake (as explained in footnote above) in the ultimate holding company of that partner body corporate
4.	Member is a Trust	·   In case of Discretionary Trust or charitable Trust – all the Trustees · In case of Specific Trust – all the Beneficiaries ·    In case of revocable Trust – the author or the settlor
5.	Member is a pooled investment vehicle OR an entity controlled by the pooled investment vehicle and those which are based in 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, and the individual in relation to the pooled investment vehicle.	·     a general partner; or ·     an investment manager; or · a Chief Executive Officer where the investment manager of such pooled vehicle is a body corporate or a partnership entity
6.	Member is a pooled investment vehicle OR an entity controlled by the pooled investment vehicle based in a jurisdiction which doesn’t fulfill the requirements referred to point 5(supra)	The requirements of points 1/2/3/4 as the case may be shall apply

3. Individual not considered as SBO: If the individual is not having right/entitlement as mentioned in point(1), he will not be considered SBO

4. Holding a right or entitlement Directly: In case if the individual holds direct right/entitlement or if the individual beneficial interest in the share u/s 89(2) and the declaration has been made, than the individual is out of the purview of SBO

5. Instruments to be considered - For the purposes of SBO, the instruments in the form of global depository receipts, compulsorily convertible preference shares or compulsorily convertible debentures shall be treated as 'shares'.

Exemptions from the compliance requirements under SBO Rules

The disclosure requirements under SBO Rules shall not be applicable with respect to the shares of the reporting company held by,

1. IEPF Authority constituted under section 125(5) of the Companies Act, 2013;
2. Holding reporting company - The details of such holding reporting company shall be reported in Form No. BEN-2.
3. the Central Government, State Government or any local Authority;
4.   (i) a reporting company, or (ii) a body corporate, or (iii) 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;
5.  SEBI registered Investment Vehicles such as mutual funds, alternative investment funds (AIF), Real Estate Investment Trusts (REITs), Infrastructure Investment Trust (lnVITs) regulated by SEBI,
6. Investment Vehicles regulated by RBI, or IRDA, or Pension Fund Regulatory and Development Authority

Reporting Requirements: 

1. Disclosure to be made by SBO in form BEN-1 to the reporting company within 90 days from 8 Feb, 2019 i.e., by 9 May, 2019 
2. The Reporting Company is required to file a return with registrar in e- Form BEN- 2 i.e., by 8 June 2019
3. In case of change disclosure is to be made within 30 days and return is to be filed in with registrar for change therein within 30 days. 
4. Reporting Company to maintain a register of the interest declared and any changes therein in Form BEN - 3                   

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[1] Reporting Company is defined in Rule 2(f) of the SBO Rules to mean a company as defined in clause (20) of section 2 of the Act, required to comply with the requirements of section 90 of the Act

[2] Significant influence is defined in rule 2(i) to mean the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company but is not control or joint control of those policies

[3] As per Explanation V to Rule 2(h) of SBO Rules, individuals shall be deemed to be “acting together” if such individual or individuals acting through any person or trust, act with a common intent or purpose of exercising any rights or entitlements, or exercising control or significant influence, over a reporting company, pursuant to an agreement or understanding, formal or informal.

[4] "Majority Stake" is defined in Rule 2(d) of SBO Rules to mean

(i) holding more than one-half of the equity share capital in the body corporate; or

(ii) holding more than one-half of the voting rights in the body corporate; or

(iii) having the right to receive or participate in more than one-half of the distributable dividend or any other distribution by the body corporate