Introduction
The Ministry of Corporate Affairs has issued notices emphasizing the importance of compliance with Section 90 of the Companies Act, 2013. This section deals with the Register of Significant Beneficial Owners in a company. Non-compliance with the provisions of this section can lead to serious consequences, including legal penalties.
Exemptions and Applicability
- Exemptions: Section 90 does not apply to Government Companies, provided they have maintained financial regularity.
Declaration by Significant Beneficial Owners
Individual Declaration (Section 90(1)): Any individual holding at least twenty-five percent beneficial interest in a company must declare their interest to the company. This declaration includes details of ownership, nature of interest, and other prescribed particulars.
- Exception: The Central Government may exempt certain classes of persons from this requirement.
Company's Register (Section 90(2)): The company is obligated to maintain a register of such declarations, including individual details like name, date of birth, and address.
Inspection and Filing (Sections 90(3) and 90(4)): The register is open for inspection by company members, with necessary fees. Additionally, the company must file a return of significant beneficial owners with the Registrar.
Identification and Compliance (Section 90(4A)): Companies must identify significant beneficial owners and ensure their compliance with Section 90.
Notice to Persons and Remedial Measures
Notice to Potential Beneficial Owners (Section 90(5)): The company must notify individuals it believes are significant beneficial owners or have relevant information.
Response and Tribunal Application (Sections 90(6) and 90(7)): Individuals must respond within thirty days. If unsatisfactory, the company can apply to the Tribunal for restrictions on shares.
Tribunal's Decision (Section 90(8)): The Tribunal may restrict rights attached to shares after a hearing.
Relaxation Application (Section 90(9)): Companies or affected individuals can apply for relaxation or lifting of restrictions within one year.
Penalties for Non-Compliance
Individual Penalty (Section 90(10)): Failure to declare interest may result in imprisonment or fines.
Company Officer Penalty (Section 90(11)): Failure to maintain the register or deny inspection may lead to fines for the company and its officers.
False Information (Section 90(12)): Willful submission of false information may lead to action under Section 447.
Applicable Rules
Definitions and Duty of Reporting Company (Rules 2 and 2A): Rules provide detailed definitions and obligations for reporting companies.
Declaration and Return Forms (Rules 3 and 4): Specific forms (BEN-1 and BEN-2) are prescribed for declarations and returns.
Register Maintenance and Inspection (Rule 5): Rule 5 outlines the maintenance and inspection of the register of significant beneficial owners.
Application to Tribunal (Rule 7): Rule 7 details the process for a reporting company to apply to the Tribunal for restrictions.
Non-Applicability (Rule 8): Certain entities are exempt from these rules, including government bodies and regulated investment vehicles.
Applicable Circulars
Extension of Filing Deadlines (Circulars dated 6-9-2018, 10-09-2018, 29-07-2019, and 24th September 2019): Circulars provide extensions for filing Form BEN-2 without additional fees.
Clarifications on Filing BEN-1 (Circular dated 10-09-2018): Due dates for filing BEN-1 were revised, and stakeholders were advised to adhere to revised timelines.
Further Extension and Relaxation (Circular dated 01-01-2020): Extension of filing e-form BEN-2 without additional fees until 31.03.2020.
Conclusion
Compliance with Section 90 and related rules is crucial for companies and significant beneficial owners. Failure to adhere to these regulations may result in severe penalties. It is recommended that all stakeholders stay informed about the applicable rules and deadlines to ensure smooth compliance with the law.
