Are you still awaiting BEN-1 from your Company’s SBO?

The Ministry of Corporate Affairs (MCA) had amended the Companies (Significant Beneficial Owners) Rules, 2018 (“SBO Rules”) which has been effective from 8 February 2019.  Under these amended SBO Rules read with Section 90 of the Companies Act, 2013, every individual who is acting as Significant Beneficial Owner (SBO) is required to give declaration in form BEN-1 within the 90 days from 8 February 2019 (date of notification) to such reporting company.

This timeline of 90 days for the Individual SBOs for giving declaration to the Reporting Companies is ending on 9 May 2019, and if BEN-1 is not received from SBOs till this deadline, then the reporting Company needs to take the steps mentioned below:-

The Company has to send notice in the BEN – 4 to all such non-individual members who hold not less than 10% of shares/voting rights/right to receive or participate in the dividend or any other distribution payable in a financial year. It is a mandatory actionable on part of every company which has such non-individual members.  

After sending notice in Form BEN-4, if the SBO fails to give information or the information provided is not satisfactory, then as per Section 90(7) of Companies Act, 2013, the Company has to (mandatorily) apply to the NCLT within a period of 15 days from the date of expiry of 30 days provided in the BEN-4, for an order directing that the shares in question be subject to restrictions including:-

1. restrictions on transfer of interest attached to these shares
2. suspension of right to receive dividend or any other distribution in relation to these shares
3. suspension of voting rights in relation to these shares
4. any other restriction on all or any of the rights attached to these shares

As per Section 90(8) and Section 90(9) of Companies Act, 2013, the NCLT may make order restricting the rights attached to these shares within a period of 60 days from date of receipt of application. Thereafter, the SBO /non-individual shareholder may make an application to NCLT within a period of 1 year from date of order for relaxation or lifting of restrictions placed by NCLT. If no such application is made within 1 year from date of NCLT order, then such shares shall be transferred to Investor Education Protection Fund (IEPF) Authority.

Hence, it is very important for all companies to ensure that their individual SBOs file the declaration in BEN-1 on or before 9 May 2019. Further all companies need to ensure that if they have not received BEN-1 on or before 9 May 2019, then notice in Form BEN-4 is given to all non-individual members holding more than 10% of shares / voting rights/right to receive or participate in the dividend or any other distribution payable in a financial year, on an Immediate Basis….