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

The Registrar of Companies & Adjudicating Officer, UP, Kanpur ruled on non-compliance with Section 90 of the Companies Act, 2013 regarding Significant Beneficial Owner (SBO) disclosure requirements. The company failed to exercise due diligence in identifying SBOs and provide required documentation. The court held that Section 90 establishes dual objective and subjective tests for SBO identification through shareholding thresholds or significant influence/control. The company and its officers violated Section 90(4A) by failing to identify and require SBO compliance. The company was directed to identify all SBOs and file e-form BEN-2 within 90 days under Section 454(3)(b), with penalties imposed for the violation.

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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.

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