India: Significant Beneficial Owner
The Ministry of Corporate Affairs (“MCA”) issued a notification on October 27, 2023 (“Notification”), which requires every company to designate a person who shall be responsible for furnishing and extending co-operation for providing information to the Registrar of Companies with respect to beneficial interest in the shares of the company.
Lately, MCA has been undertaking checks and requesting companies to streamline their records to ensure that the company and its directors are in strict compliance with the provisions relating to Significant Beneficial Ownership (“SBO”). This was evident when the MCA had issued an auto-generated advisory to all the directors of the company requiring them to ensure strict compliance of provisions in relation to applicability of SBO. Soon after, the above-mentioned Notification was issued by the MCA. Please refer to the below requirements to be complied with by a company for identifying an SBO or in the event where an SBO has been identified.
Key changes and requirements
The Indian company will need to take necessary steps to determine if there is an individual who can be classified as an SBO (as defined and explained below). For the purposes of determination, a notice needs to be issued by the Indian company to its shareholders (other than an individual) in the prescribed Form BEN-4. The Indian company will then need to file a return in the prescribed Form BEN-2, with the RoC (Registrar of Companies), within a period of 30 days from the date of receipt of the duly filled and signed Form BEN-1 from the SBO.
An SBO is an individual who, acting alone, together, or through one or more persons or trust, possesses one or more of the following rights or entitlements in an Indian company:
Holds 10% or more shares, indirectly or together with direct holdings.
Holds 10% or more voting rights in the shares, indirectly or together with direct holdings.
Has right to receive or participate in not less than 10% of the total distributable dividend, or any other distribution, in a fiscal year, through indirect holding alone or together with direct holdings.
Has the right to exercise, or exercises, significant influence or control in any manner other than through direct holdings alone.
The term ‘indirect holdings’ is defined as a shareholder (“Direct Holder”) of the Indian company that is a corporate body (whether incorporated in India or outside India), an individual will be considered to have indirect holding in the Indian company if he satisfies the below criteria, acting together or through one or more persons:
holds majority stake in the Direct Holder of the Indian company; or
holds majority stake in the ultimate holding company of the Direct Holder.
The term ‘majority stake’ means: (i) holding more than 50% of the equity shares in the body corporate; (ii) holding more than 50% of the voting rights in the body corporate; or (iii) having the right to receive or participate in more than 50% of the distributable dividend or any other distribution in the body corporate.
The term ‘significant influence’ means the power to participate, directly or indirectly, in the financial and operating policy decisions of the Indian company but is not in control or joint control of those policies.
The term ‘control’ includes the right to appoint majority of the directors or to control the management of policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.
How can we help?
Computershare Governance Services global team of professionals are available to guide you through the process of initially determining the SBO and the ongoing advisory oversight to monitor a change in the organization structure that may result in a triggering event that will require an update to the Registrar for a change of the SBO.
Computershare’s leading entity management system GEMS can also help you to manage and store your beneficial ownership information, as well as the information about shareholdings, ownership, and directorships on a global basis.
Contact:
Please contact your dedicated Computershare Relationship Manager or send an email to globalentityservices@computershare.com for more information about how Computershare may assist you in responding to these new requirements.
This notice is provided by Computershare for general informational purposes only and is not intended and should not be construed as legal, regulatory, financial or tax advice. Computershare is not licensed or authorized to practice law in any jurisdictions and hence does not provide any legal advice and it does not hold itself out as doing so. Neither Computershare nor any of its affiliates or contributors accept any responsibility or liability for the quality, accuracy or completeness of any information contained in this notice. It is important that you seek independent professional advice relating to the subject matter of this notice before relying on it.