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The Ministry of Corporate Affairs yesterday notified Companies (Significant Beneficial Ownership) Amendment Rules 2019, to amend the Significant Beneficial Ownership Rules 2018 notified last June. The main aim of the rule is to reveal individual shareholders by looking through corporate layers as they ultimately derive economic benefits from the corporate entity.
Rule 2(h) is introduced by the amendment which seeks to substitute the present definition of 'significant beneficial owner' as:
"significant beneficial owner, in relation to a reporting company, means an individual referred to in sub-section (1) of section 90, 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:
Only if a criteria as followed is satisfied an individual is considered to hold a right or entitlement directly in reporting company:
After the amendment through the way of HUF, body corporate, partnership entities and trusts the individual holds the right or entitlement indirectly which even extends the Rule to holding of shares in instances of pooled investment vehicles.
As per new Rule 2(i), "significant influence" is defined as 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'. The new Rule 2A states that every reporting company shall take necessary steps to find out if there is any individual who is a significant beneficial owner as defined in the Rules and make such individuals to file a declaration. Also, the company shall serve notice to all members(other than individuals) of a company which if they are holding not less than ten percent of shares or voting rights or right to receive or participate in dividend or any distribution payable in a financial year, seeking information in accordance with Section 90(5). Every significant beneficial owner of a company has to file a declaration to that effect within 90 days of commencement of the amendment rules.
As per the substitution sought to be made to Rule 7, in case the significant beneficial owner fails to give satisfactory information in accordance with Section 90(7), the company can apply to the National Company Law Tribunal for directing that the shares in question be subject to restrictions, including –
any other restriction on all or any of the rights attached with the shares in question.
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