The person whose name appears in a company’s register of members is not always the person who owns the economic interest in the shares. Nominee holdings, such as a director holding one share on behalf of a holding company, are common. Section 89 requires both the registered owner and the beneficial owner to declare such arrangements, and the company to report them to the Registrar.

This article walks through the declarations, the company’s filing obligations, and the designated person requirement introduced in 2023, with the timeline for each step.

Who Declares What

A common case is a holding company that keeps a nominee shareholder in its subsidiary to meet the minimum number of members. The nominee files MGT-4, the holding company files MGT-5, and the subsidiary files MGT-6 (Section 187(2) read with Section 89).

Step-by-Step Procedure

Step 1: Designation of Person Responsible for Beneficial Interest Information – one-time, and on every change
(Applicable to All Companies)
Rule 9(4) to 9(8) of the Companies (Management and Administration) Rules, 2014

• Every company is required to designate a person responsible for furnishing information on beneficial interest in its shares to the Registrar or any other authorised officer.
• The designated person is the Company Secretary, if the company has one. Otherwise it is a KMP, or failing that, a director, designated by the Board. Until a designation is made, the Company Secretary, or else every director, is treated as the designated person.
• Details of the designated person are reported in the annual return. Any change is required to be intimated to the Registrar in e-Form GNL-2.

Step 2: Receipt of Declarations in MGT-4 and MGT-5 – within 30 days of the triggering event
(Applicable to All Companies)
Section 89(1) to (3) of the Companies Act, 2013 read with Rule 9(1) and 9(2)

• The company receives the declaration from the registered owner in Form MGT-4 and from the beneficial owner in Form MGT-5, and records the date of receipt, from which its own filing period runs.
• The company should check that the folio, number of shares and particulars match its records.

Step 3: Note in the Register of Members – on receipt
(Applicable to All Companies)
Sections 88 and 89(6) of the Companies Act, 2013

A note of the declaration is required to be made in the Register of Members (Form MGT-1) against the relevant folio, recording the name and particulars of the beneficial owner.

Step 4: Placing the Declarations before the Board – at the next Board Meeting
(Applicable to All Companies)
Section 173 of the Companies Act, 2013 read with SS-1

As good practice, declarations received are placed before the Board, which takes note of them and authorises a director or the Company Secretary to file MGT-6. This is not a pre-condition for filing, which cannot wait beyond 30 days.

Step 5: Filing of e-Form MGT-6 – within 30 days of receipt of the declaration
(Applicable to All Companies)
Section 89(6) of the Companies Act, 2013 read with Rule 9(3)

The company is required to file a return in e-Form MGT-6 with the Registrar for each declaration received, attaching copies of MGT-4 and MGT-5. A specified IFSC company has 60 days.

Step 6: Annual Return – within 60 days of the AGM
(Applicable to All Companies)
Section 92 of the Companies Act, 2013 read with Rule 9(7)

The annual return is required to include the details of the designated person.

Effect of declarations. No right in respect of the shares can be enforced by a person who was required to make a declaration but did not (Section 89(8)). Payment of dividend to the registered member discharges the company (Section 89(9)). For listed companies, beneficial ownership is reflected through the significant beneficial owner table in the quarterly shareholding pattern under Regulation 31 of the SEBI (LODR) Regulations.

Penalties for Non-Compliance

Section 89 at a Glance

Day 0 = Date of receipt of declaration by the company