The Ministry of Corporate Affairs, on February 8, 2019, issued a notification in respect of the Companies (Significant Beneficial Owners) Amendment Rules, 2019 (“Amendment Rules”) to amend the Companies (Significant Beneficial Owners) Rules, 2018 (“Rules”). 

Pursuant to the Amendment Rules, the definition of ‘significant beneficial owner’ in relation to a reporting company (which is required to comply with the provisions of section 90 of CA 2013) has been amended to mean an individual referred to in section 90(1) of the Companies Act, 2013 (“CA 2013”), who acting alone or together, or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting company, namely:

1. holds indirectly, or together with any direct holdings, not less than ten per cent of the shares;
2. holds indirectly, or together with any direct holdings, not less than ten per cent of the voting rights in the shares; 
3. has right to receive or participate in not less than ten per cent of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings; 
4. has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct-holdings alone. 

An individual shall be considered to hold a right or entitlement directly in the reporting company, if he satisfies any of the following criteria, namely:

the shares in the reporting company representing such right or entitlement are held in the name of the individual;

the individual holds or acquires a beneficial interest in the share of the reporting company under section 89(2) of the CA 2013, and has made a declaration in this regard to the reporting company.

Further, the amended definition also covers individuals holding a right or entitlement indirectly through HUF, body corporates, partnership entities, trusts and pooled investment vehicles, being members of the reporting company. 

Pursuant to the Amendment Rules, the term ‘significant influence’ has been defined as the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company but is not control or joint control of those policies. 

Every reporting company is required to take necessary steps to find out if there is an individual who is a significant beneficial owner and cause such individual to make a declaration in Form BEN-1. Further, every individual is or becomes a significant beneficial owner is required to file a declaration in Form BEN-1 to the reporting company. Upon receipt of such declaration, the reporting company will file a return with the RoC in Form BEN-2.

The Amendment Rules also provide the revised Form BEN-1, Form BEN-2, Form BEN-3 and Form BEN-4.

The amended Rules will not be applicable to the extent the shares of the reporting company are held, inter alia, by SEBI registered investment vehicles such as mutual funds, AIFs, REITs and InVITs, investment vehicles regulated by RBI, IRDA or PFRDA.