All about Significant Beneficial Owners (SBO) rules, 2019 – BEN 1, BEN 2

by Agam Gupta 13.9K

If you are already crying about too much compliance for the year ending 2019, then we would advise you to add another one in the list which could be a real pain in the head, the return for Significant Beneficial Ownership return.

Significant Beneficial ownership is basically a declaration given by the individual who has a significant control or influence in the company. Since, it is bit technical, let us understand the rules about it.

The amended significant beneficial ownership rules are notified by the government; let us understand more about them.
 

Applicability of SBO Rules 2019

The significant ownership concepts comes from the section 90 of the Companies Act 2013 and rules made thereunder. As per the section 90, this rule is applicable to all the companies except for some types of companies (government company, local authority, registered funds etc)
 

Meaning of Significant Beneficial owner

In a very simple term, Individual who possesses one or more of the following rights or entitlements in a company will be regarded as a significant beneficial owner.

If you one of your shareholders falls under any of the above category, then you becomes the reporting entity who is required to file a return with the ROC.

In simple words, if any individual holds 10% or more through any corporate entity, then it shall be called beneficial ownership.
 

Duty of a reporting company

To comply with the requirement of section 90 and rules made there under, company should follow the following procedure;

All individuals (who are covered above) shall file the BEN 1 form with the company mandatorily even for the changes during the year.
 

Maintain Register in BEN 3

Apart from the above compliance and procedure, the reporting company also needs to prepare the register for significant beneficial ownership in the form BEN – 3.
 

Return to file by the company

Once all the individuals have reported in BEN 1 form, the company shall file a return in FORM BEN – 2 with the registrar within thirty days from the receipt of such declaration from the individuals.
 

Application to the tribunal

If the individual fails to file the form with the company, then company shall apply to the tribunal. The company shall apply to the tribunal in the following cases;

After getting the information, the tribunal may order;

Summary of form and their details with due dates

Particulars

Due Dates

Details

BEN 1 form

90 days from the date of notification

Declaration by individual regarding significant beneficial ownership in shares

BEN 2 form

Within 30 days of receipt of BEN 1

Return to be submitted to the registrar by the company

BEN 3 form

To be maintained properly

Register of beneficial ownership

BEN 4 form

Notice to be sent

Notice seeking information from the individual about the significant beneficial ownership

Penalty under SBO Rules 2019

If the company or the individual couldn’t comply with the above rules and regulations, then they shall be liable for the following penalties;

Offense

Penalty

If the person fails to make declaration in BEN 1

Penalty not less than Rs. One lakh, which can be extended up to Rs. ten lakh

If the company fails to maintain the register

Penalty not less than Rs. ten lakh, which can be extended up to Rs. Fifty lakh and Rs.1000 per day for continuous failure.

Company with all individual shareholding

If your company does not have any corporate entity, then BEN 1 is not required to be filed.
 

Conclusion

On a daily basis, the compliances are getting difficult and stringent; hence, it is advised to hire an expert to avoid any default.

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