The 2013 Corporate Act has brought a new revolution by lifting the Corporate Veil concept with an aim to safeguard the investor interests in every possible way.

In addition to the prevailing stringent norms with regard to related party transactions, the MCA has taken a step further and mandated all companies under its administration to disclose as a part of their routine regulatory filings, the significant beneficial owners in form BEN-2 to the Registrar of Companies in their respective jurisdictions. This notification which is largely based on the recommendations of Financial Action Task Force, an inter-governmental organization is also seen as a move against money laundering and terror financing through complex structured transactions.

Who is a significant beneficial owner (SBO)?

An individual, acting alone or together with others (including trusts and persons resident outside India), who beneficial interests of not less than 10% in the shares of the relevant company or holds the right to exercise significant influence over the firm.

The Act has defined beneficial interest pervasively as the direct or indirect right of a person exercised through contract or otherwise upon shares or to receive or participate in any dividends or other distribution in respect of the shares. 

The SBOs are required to make a declaration to the companies expressing their status in BEN-1, upon the receipt of which companies shall file such particulars with ROC in BEN-2. Subsequently, a unique number gets allocated to each SBO. 

It is noteworthy to mention here that the SEBI has also now issued separate circular directing the listed companies to file the disclosure of SBOs as a part of the quarterly disclosure of shareholdings to stock exchanges.

The penalty for non- compliance shall fall on the reporting company and every officer in default for a fine amount not less than ₹10 lakhs which may extend up to ₹50 lakhs and in case of continuing default a fine of ₹1000 per day. Currently the Companies Regulator has permitted companies to furnish this information by March 31, 2020.