Section 90 looks through layers of companies, trusts and partnerships to find the individuals who ultimately own or control a company. These individuals, called significant beneficial owners (SBOs), are required to declare their interest, and the company is required to identify them, keep a register and report them to the Registrar.

This article explains who is an SBO and walks through the company’s obligations, from identification to the Tribunal process where information is not given, with the timeline for each step.

Who is a Significant Beneficial Owner

An SBO is an individual who, acting alone, together with others or through one or more persons or trusts, holds indirectly (or together with direct holdings) at least 10% of the shares, voting rights or right to receive dividend, or who has the right to exercise, or actually exercises, significant influence or control otherwise than through direct holdings alone (Rule 2(1)(h)). Indirect holdings are traced through companies, HUFs, partnership firms, trusts and pooled investment vehicles. Global depository receipts, compulsorily convertible preference shares and compulsorily convertible debentures are treated as shares.

The Rules do not apply to holdings by the IEPF Authority, the holding reporting company (whose details are reported in BEN-2), the Central or State Government, Government-controlled entities, and investment vehicles regulated by SEBI, RBI, IRDAI or PFRDA (Rule 8).

Step-by-Step Procedure

Step 1: Identification of SBOs by the Company – on an ongoing basis
(Applicable to All Companies)
Section 90(4A) of the Companies Act, 2013 read with Rule 2A(1) of the SBO Rules

Every company is required to take necessary steps to find out whether any individual is an SBO and, if so, identify that individual and cause him or her to make a declaration in Form BEN-1.

Step 2: Notice in Form BEN-4 to Non-Individual Members – on identification of a 10% non-individual member
(Applicable to All Companies)
Section 90(5) of the Companies Act, 2013 read with Rules 2A(2) and 6 of the SBO Rules

• Every company is required to give notice in Form BEN-4 to any member (other than an individual) holding at least 10% of its shares, voting rights or dividend rights, seeking information on its SBOs.
• Notice is also required to be given to any person the company knows or has reasonable cause to believe is an SBO or has knowledge of one.
• A listed company discloses the issue of BEN-4 notices to the stock exchanges under Regulation 30 where material.

Step 3: Declaration by SBO in Form BEN-1 – within 30 days of becoming an SBO or of any change
(Applicable to All Companies)
Section 90(1) of the Companies Act, 2013 read with Rule 3 of the SBO Rules

Every individual who becomes an SBO, or whose significant beneficial ownership changes, is required to file a declaration in Form BEN-1 with the company within 30 days. The person who receives a BEN-4 notice is required to reply within 30 days of the notice (Section 90(6)).

Step 4: Register of SBOs in Form BEN-3 – on receipt of BEN-1
(Applicable to All Companies)
Section 90(2) and (3) of the Companies Act, 2013 read with Rule 5 of the SBO Rules

• The company is required to enter the particulars of every SBO in the register in Form BEN-3.
• The register is required to be open for inspection by members for at least 2 hours on every working day, on payment of a fee of not more than ₹50 per inspection.

Step 5: Placing BEN-1 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, BEN-1 declarations are placed before the Board, which takes note of them and authorises filing of BEN-2. This is not a pre-condition for filing.

Step 6: Filing of e-Form BEN-2 – within 30 days of receipt of BEN-1
(Applicable to All Companies)
Section 90(4) of the Companies Act, 2013 read with Rule 4 of the SBO Rules

The company is required to file a return in e-Form BEN-2 with the Registrar within 30 days of receiving each BEN-1, using the revised form on the MCA V3 portal, which also covers changes, cessation and details of a holding reporting company.

Step 7: Application to the Tribunal where Information is Not Given – within 15 days of expiry of the period in the notice
(Applicable to All Companies)
Section 90(7) to (9) of the Companies Act, 2013 read with Rule 7 of the SBO Rules

• Where a person fails to give the information sought in BEN-4, or the information is not satisfactory, the company is required to apply to the NCLT within 15 days of the expiry of the period in the notice, seeking restrictions on the shares, such as on transfer, dividend and voting rights.
• The Tribunal may pass an order restricting the rights within 60 days of the application. The company files a copy of the order with the Registrar in e-Form INC-28 within 30 days.
• If no application for relaxation or lifting of the restrictions is made within one year of the order, the shares are transferred to the IEPF Authority.
• A listed company discloses the outcome to the stock exchanges under Regulation 30.

Listed companies. The quarterly shareholding pattern under Regulation 31 of the SEBI (LODR) Regulations includes a table of significant beneficial owners, filed within 21 days of the end of each quarter.

Penalties for Non-Compliance

SBO Compliance at a Glance

Day 0 = Date of receipt of BEN-1 by the company