SIGNIFICANT BENEFICIAL OWNERS IN A COMPANY

Investigation

Section 90 of the Companies Act, 2013 (‘Act’ for short) provides for investigation of beneficial ownership of shares in certain cases.  The said section provides that where it appears to the Central Government that there are reasons to do, it may appoint one or more competent persons to investigate and report as to beneficial ownership with regard to nay share or class of shares and the provisions of section 216 shall, as far as may be, apply to such investigation as if it were an investigation ordered under this section.

Amendment

Section 90 of the Act has now been substituted vide Section 22 of Companies (Amendment) Act, 2017 by a new section.  The Companies (Amendment) Act, 2017 got the assent of the President of India on 03.01.2018 but the same has not been notified for its effect.  The newly substituted section 90 will come into force once it is notified.

Declaration

Every individual, who acting alone or together or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than 25% or such other percentage as may be prescribed, in shares of a company or the right to exercise or the actual exercising of significant influence or control over the company shall make a declaration to the company specifying the nature of his interest and other particulars in such manner and within such period of acquisition of the beneficial interest or rights and any change thereof as may be prescribed.

The Central Government may prescribe a class or classes of persons who shall not be required to make declaration.

If a person fails to make a declaration, he shall be punishable with fine which shall not be less than ₹ 1 lakh but which may extend to ₹ 10 lakhs.  Where the failure is continuing one, with a further fine which may extend to ₹ 1000/- for every day after the first during which the failure continues, will be imposed.

If any person willfully furnishes any false or incorrect information or suppress any material information of which he is aware in the declaration made under this section, he shall be liable to action under section 447 of the Act.

Register

Every company shall maintain a register of the interest declared by the individuals and changes therein which shall include the name of the individual, date of birth, address, details of ownership in the company and such other details as may be prescribed

Inspection of register

The register maintained shall be open to inspection by any member of the company on payment of such fees as may be prescribed.

Return

Every company shall file a return of a significant beneficial owners of the company and changes therein with the Registrar of Companies containing names, addresses and other details as may be prescribed within such time, in such form and manner as may be prescribed.

Notice by company

A company shall give notice, in the prescribed manner to any person, whether or not a member of the company, whom the company knows or has reasonable cause to believe-

• to be a significant beneficial owner of the company;
• to be having knowledge of the identify of a significant beneficial owner or another person likely to have such knowledge; or
• to have been a significant beneficial owner of the company at any time during the three years immediately preceding the date on which the notice is issued,

and who is not registered as a significant beneficial owner with the company as required under this section

Supply of information

The person, who receives notice from the company for furnishing information, is to give information within a period not exceeding 30 days of the date of the notice.

Application to Tribunal

The company shall-

• where the person concerned fails to give the company the information required by the notice within the time specified therein; or
• where the information given is not satisfactory

apply to the Tribunal within a period of 15 days of the expiry of the period specified in the notice for an order directing that the shares in question subject to restrictions with regard to transfer of interest, suspension of all rights attached to the shares and such other matters as may be prescribed

The Tribunal, on an application, may after giving an opportunity of being heard to the parties concerned, make such order restricting the rights attached with the shares within a period of 60 days of the receipt of application or such other period as may be prescribed.

Penalty

If a company, required to maintain register and file the information, fails to do so or denies inspection of register, the company and every officer of the company, who is in default, shall be punishable with fine which shall not be less than ₹ 10 lakhs but which may extend to ₹ 50 lakhs.  Where the failure is a continuous one, a further fine which may extend to ₹ 1000/- for every day after the first during which the failure continues will be imposed.