2024 (7) TMI 448 - Other - Companies Law

Company penalized for failing to identify Significant Beneficial Owners under Section 90 compliance requirements

IN RE : SAMSUNG DISPLAY NOIDA PRIVATE LIMITED

The Registrar of Companies & Adjudicating Officer, UP, Kanpur ruled on non-compliance with Section 90 of the Companies Act, 2013 regarding Significant ... Declaration as Significant Beneficial Owner - Non-compliance of Section 90 r/w the Companies (Significant Beneficial Owners) Rules, 2018 of the Companies Act, 2013 - Adjudication of Penalty. Declaration as Significant Beneficial Owner - HELD THAT:- Section 90 of the Act r/w Rules made thereunder deals with the concept of disclosure of Significant Beneficial Owner (SBC)) in a company. Section 90 provides a dual test of objective and subjective for identification of a 'Significant Beneficial Owner'. The section along with the rules provide for determination of the SBO either through a concept of threshold limit in the shares of the company or through exercise of significant influence or a control in the company, thus Section 90 and the SBO Rules made thereunder does not restrict the threshold limit in shares only, to establish the SBO in a company, when there also exists significant influence or control by any individual directly or indirectly. From the details submitted by the reporting company vide its various replies to the Registrar, it is clear that all required information and documentary evidences have not been submitted before this office. Further, it also appears from the material placed in this Order that the reporting company has failed to exercise the necessary due diligence to ascertain the SBO in terms of the provisions of Section 90 of Act r/w SBO Rules. The reporting company has not taken necessary action to identify an individual(s) who is /are SBC) in relation to company and require them to comply with the provisions of Section 90 of the Act, thus the subjected company and its officers who is in default have violated the provisions of Section 90(4A) of the Companies Act, 2013. Adjudication of Penalty - HELD THAT:- In respect of the violation under Section 90 r/w SBO Rules of the Act, the company Samsung Display Noida Pvt. Limited, its 'officers' are further directed pursuant to Section 454(3) (b) of the Companies Act, 2013 to determine all the individuals who fall under the definition of 'significant beneficial owner' in the letter and spirit of the Act, in respect of the reporting company and file the relevant e-form BEN-2 with respect to all such individuals within a period of 90 days from the date of this Order. Attention is also invited to Section 454(8) of the Companies Act, 2013, in the event of noncompliance of this order. In case appeal is made, 0/0 the Registrar of Companies, U.P may be informed alongwith the penalty imposed and the payments made. Issues Involved:1. Compliance with Section 90 of the Companies Act, 2013.2. Identification and declaration of Significant Beneficial Owner (SBO).3. Filing of e-form BEN-2.4. Adjudication of Penalty for non-compliance.Detailed Analysis:1. Compliance with Section 90 of the Companies Act, 2013:The judgment revolves around the compliance with Section 90 of the Companies Act, 2013, which mandates that every individual holding beneficial interests in shares of a company amounting to not less than 25% must make a declaration specifying the nature of their interest. The company is required to maintain a register of such interests and file returns with the Registrar. The reporting company, being a wholly-owned subsidiary of Samsung Display Co., Limited, Korea, failed to comply with these requirements.2. Identification and Declaration of Significant Beneficial Owner (SBO):The reporting company argued that there was no individual SBO since Samsung Display Co., Korea, and Samsung Electronics Co., Korea, are listed companies run by independent boards. However, the judgment highlighted that the company did not consider indirect holdings or rights exercised through distributable dividends, control, or significant influence. The significant beneficial owner is defined as an individual holding not less than 10% of shares, voting rights, or having significant influence or control over the company.3. Filing of e-form BEN-2:The reporting company failed to file e-form BEN-2, which is required for declaring the beneficial ownership. Despite being given multiple opportunities and notices, the company did not submit the necessary information and documents to identify the SBO. The judgment emphasized that the company should have taken steps to identify any individual who is an SBO and required them to comply with the provisions of Section 90 by issuing notices in form BEN-4.4. Adjudication of Penalty for Non-Compliance:The judgment concluded that the reporting company and its officers failed to comply with Section 90 and the SBO Rules. The penalty for non-compliance was calculated based on the default period from the date of decriminalization of default (21.12.2020) to the date of issuance of the Show Cause Notice (15.04.2024). The total penalty imposed amounted to Rs. 8,14,200, which included penalties on the company and its officers.Conclusion:The judgment directed the reporting company and its officers to determine all individuals who fall under the definition of 'significant beneficial owner' and file the relevant e-form BEN-2 within 90 days. The company was also ordered to pay the penalty within 90 days and was informed about the right to appeal the order within sixty days.Significant Phrases:- 'Significant Beneficial Owner'- 'Indirect holdings'- 'Significant influence or control'- 'e-form BEN-2'- 'Show Cause Notice'- 'Adjudication of Penalty'Final Orders:The reporting company and its officers were directed to comply with the provisions of Section 90 by identifying and declaring the SBO, filing e-form BEN-2, and paying the imposed penalties. The judgment also provided the option to appeal within sixty days.