Companies to Report any change in share holding to ROC with in 30 days in FORM BEN 1 and BEN 2

Shareholders are owners of the company as they invest money into company and are interested in financial position of the company. Companies Act, 2013 specifies multiple decisions which are to be taken by members in Annual General Meeting (œAGM) or Extra-ordinary general (œEGM) meeting either through special resolution or ordinary resolution or any other specified manner.

If majority of shares are held by any person or particular group of persons then such person or group of persons will become deciding authority by using its majority shareholding. Accordingly, recently Ministry of Corporate affairs has prescribed new reporting requirement for shareholders having substantial beneficial ownership.

• BEN 1 “ Declaration of significant beneficial ownership in shares
• BEN 2 “ Return of significant beneficial owners in shares
• BEN 3 “ Register of significant beneficial owner
• BEN 4 “ Notice by Companies

Section 90 read with Section 216 of Companies Act, 2013 (œThe Act) empowered central government that it may appoint 2 or more competent persons to investigate and report about significant beneficial ownership with regard to any share or class of shares. Further, provisions of Section 216 (Investigation of Ownership of Company) shall apply for carrying out such investigation of significant beneficial ownership.

In pursuance of power conferred u/s 90, central government provided a very detailed provisions related to significant beneficial ownership vide Companies (Amendment) Act, 2017 effective from 13th June, 2018.

Key Provisions notified related to significant beneficial ownership is as follows:

• Section-90: Register of Significant Beneficial Owners of the company
• The Companies (Significant Beneficial Owners) Amendment Rules,20l9.
• Section 216: Investigation of Ownership of company

A gamut of provisions provided in relation to significant beneficial ownership is as follows:

1. Meaning of Significant Beneficial Owner

Before heading towards compliance in relation to significant beneficial ownership, one need to carry out testing that who is significant beneficial owner of the company.

For this identification purpose, definition of œSignificant Beneficial Owner is given under Rule 2(h) of the The Companies (Significant Beneficial Owners) Rules, 2018 (œThe Rules) read with Section 90(1) of the act.

1.1 Shareholding requirement to qualify as œSignificant Beneficial Owner (Rule 2(h) of the rules read with section 90(1))

With reference to a reporting entity, Significant beneficial owner means an individual (Acting alone or together or through one or more persons or trust) who possesses one or more of the following rights in reporting entity:

1. Holds 10% or more of the shares of reporting company (Directly or Indirectly) or
2. Holds 10% or more of the voting rights in the shares of the reporting company (Directly or indirectly) or
3. Have right to receive or participate in 10% or more of the total distributable dividend or any other distribution (Directly or indirectly) or
4. Has right to exercise or actually exercises significant influence or control in any manner other than through direct holding alone.

Since holding in shares or voting right, can be directly or indirectly, it is important to understand what is the meaning of Direct holding and what is the meaning of indirect holding

1.2 Meaning of œDirect holding in company (Explanation II to Rule 2(h) of the Rules)

Any individual shall be considered as significant beneficial owner, if he has either of the aforementioned shareholding either directly or indirectly. Accordingly, explanation II to Rule 2(h) defines that a person shall be considered to hold right or entitlement directly in reporting company if he satisfies either of the following criteria, namely:

• Rights or entitlement with respect to shares in the reporting company held in name of individual itself or
• Such individual has acquired beneficial interest in shares of the reporting company u/s 89(2)* of the act and he has filed a declaration to this effect with company.

*Section 89(2) of the act specifies that if any person acquires or holds beneficial interest in shares of company then it shall make a declaration to the company specifying following details:

• Nature of his interest,
• Particulars of the person in whose name the shares are registered in the books of the company and
• such other particulars as may be prescribed.
• Read Full Article click here - https://vjmglobal.com/company-law/companies-to-report-any-change-in-share-holding-to-roc-with-in-30-days-in-form-ben-1-and-ben-2/

Tags: