{"id":50933,"date":"2022-11-24T13:01:33","date_gmt":"2022-11-24T07:31:33","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=50933"},"modified":"2024-05-18T13:56:42","modified_gmt":"2024-05-18T08:26:42","slug":"a-complete-analysis-of-section-90-of-the-companies-act-2013","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-90-of-the-companies-act-2013\/","title":{"rendered":"A Complete Analysis of Section 90 of the Companies Act, 2013"},"content":{"rendered":"\n<p>Section\n90 of the Companies Act, 2013 deals with the &#8220;register of beneficial\nowners in a company&#8221; and it states that the significant beneficial owners\nare required to make a declaration as to their beneficial interest in the\ncompany, the nature of interest held and the period of acquisition of such\ninterest. Section 90 of the Companies Act, 2013 was amended by the Companies\n(Amendment) Act, 2017 and the amended provision shifts the onus of\ninvestigating significant beneficial owners in a company from the Central\nGovernment on the individuals who share such beneficial interest to make such\ndeclaration to the company. The company must file such declarations with the\nRegistrar of Companies and ensure that such significant beneficial owners have\ncomplied with the provisions of the section and maintain a register as to the\ninterest of the significant beneficial owners in the company. The main aim of\nSection 90 of the Companies Act, 2013 is to lift the corporate veil. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-90-of-the-companies-act-2013\/#Significant_Beneficial_Owners_%E2%80%93_Who_Are_They\" >Significant Beneficial Owners \u2013 Who Are They?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-90-of-the-companies-act-2013\/#Duties_of_the_Reporting_Company_%E2%80%93_Section_90_of_the_Companies_Act_2013\" >Duties of the Reporting Company \u2013 Section 90 of\nthe Companies Act, 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-90-of-the-companies-act-2013\/#Penalties_for_Non-Compliance_under_Section_90_of_the_Companies_Act_2013\" >Penalties for Non-Compliance under\nSection 90 of the Companies Act, 2013<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/a-complete-analysis-of-section-90-of-the-companies-act-2013\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Significant_Beneficial_Owners_%E2%80%93_Who_Are_They\"><\/span>Significant Beneficial Owners \u2013 Who Are They?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section\n90(1) of the Companies Act, 2013 defines a Significant Beneficial Owner as any\nindividual who, acting alone\/together\/through one\/more persons or a trust: <\/p>\n\n\n\n<ul>\n<li>holds the beneficial interest of not\nless than 25 % or such prescribed percentage in the shares of the company, or<\/li>\n\n\n\n<li>holds the right to exercise\nsignificant influence\/control over the company.<\/li>\n<\/ul>\n\n\n\n<p>However,\nthe <strong><em>Companies\n(Significant Beneficial Owner) Rules, 2018<\/em><\/strong> also provide insight as to\nwho would be considered significant beneficial owners. <\/p>\n\n\n\n<p><strong><em>Significant\nBeneficial Owner is:<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li>In the case of an individual, every individual who acting alone\/together or through one\/more persons or a trust:\n<ul>\n<li>Holds indirectly or together with direct holdings less than 10 % of the shares in the company or<\/li>\n\n\n\n<li>Holds indirectly or together with direct holdings less than 10 percent of the voting rights in the company or<\/li>\n\n\n\n<li>Through direct or indirect holdings, has the right to receive not less than 10 % of the distributable dividend in a financial year, or<\/li>\n\n\n\n<li>Has a right to exercise\/exercise significant influence\/control in the company in any manner other than direct holdings.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>In the case where a member of the\nreporting company is a body corporate, an individual is considered to hold a\nbeneficial right or interest in the reporting company:\n<ul>\n<li>If she holds a majority stake (more\nthan 50%) in the body corporate, or<\/li>\n\n\n\n<li>If she holds such a majority stake in\nthe holding company of such body corporate.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>In the case where is a member of the\nreporting company is Hindu Undivided Family if the individual is the Karta of\nthe family.<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>In the case where a member of the\nreporting company is a partnership firm, an individual is considered to hold a\nbeneficial right or interest in the reporting company:\n<ul>\n<li>If she is the partner of such a\npartnership firm, or<\/li>\n\n\n\n<li>If she holds a majority stake in the\nbody corporate which itself is a partner in the partnership firm, or<\/li>\n\n\n\n<li>If she holds such majority stake in\nthe holding company of such body corporate which itself is a partner in the <strong><a class=\"text-primary\" href=\"https:\/\/corpbiz.io\/partnership-firm-registration\">partnership firm<\/a><\/strong>.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>In the case where a member of the\nreporting company is a trust, an individual is considered to hold a beneficial\nright or interest in the reporting company:\n<ul>\n<li>If she is the trustee of such a\ncharitable or discretionary trust, or<\/li>\n\n\n\n<li>If she is a beneficiary in a specific\ntrust, or<\/li>\n\n\n\n<li>If she is a settlor or author in the\ntrust.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>In the case where is a member of the\nreporting company is a PIV or Pooled Investment Vehicle or an entity controlled\nby such PIV from a member state of the FATF or Financial Action Task Force and\nthe regulator of its securities market is a member of the International\nOrganization of Security Forces, an individual is considered to hold a\nbeneficial right or interest in the reporting company:\n<ul>\n<li>If she is a general partner of that\nmember, or<\/li>\n\n\n\n<li>If she is an investment partner of\nthat member, or<\/li>\n\n\n\n<li>If she is the CEO where the\ninvestment manager is a partnership firm or a body corporate.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p>In\nother cases, the rules applicable to a body corporate, HUF, partnership firm or\ntrust shall apply. However, the rules fail to mention about the individuals who\nare to be declared as Significant Beneficial Owners from states not compliant\nwith FATF.<\/p>\n\n\n\n<p>Significant\nbeneficial owners are required to submit form BEN-1 with their declarations as\nto their beneficial interest to the reporting company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Duties_of_the_Reporting_Company_%E2%80%93_Section_90_of_the_Companies_Act_2013\"><\/span>Duties of the Reporting Company \u2013 Section 90 of\nthe Companies Act, 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The following are some duties of the\nReporting Company under Section 90 of the Companies Act, 2013:<\/p>\n\n\n\n<ul>\n<li>When the reporting company receives form BEN-1 from the significant beneficial owners, it is to file form BEN-2 and submit it to the Registrar of Companies within thirty days of receipt of such declaration, giving details as to the interest held by the significant beneficial owners.<\/li>\n\n\n\n<li>Section 90(2) of the Companies Act, 2013 puts an onus on the reporting company to maintain also maintain a register as to the name, date of birth, address, interest held by the significant beneficial owners in the company.<\/li>\n\n\n\n<li>Section 90(4A) of the Act mandates that the company shall investigate into the significant beneficial owners of the company and make sure that they comply with the provisions of this section.<\/li>\n\n\n\n<li>Section 90(5) of the Act mandates that the company ought to give the notice to make such a declaration to individuals it believes to be a significant beneficial owner or to one who might have knowledge as to such significant beneficial owner but has not registered as a significant beneficial owner.<\/li>\n<\/ul>\n\n\n\n<p><strong><em>Such person receiving a notice\nunder Section 90(5) of the Act is to respond to the same within 30 days of\nreceipt of such notice.<\/em><\/strong><\/p>\n\n\n\n<ul>\n<li>Where\nthe company does not receive a satisfactory response or any response to the\nnotice within thirty days from the receipt of the notice, the company must\napply to the Tribunal within fifteen days of the expiry period in the notice to\nhave the shares of the such significant beneficial owner be restricted with\nrespect to the transfer of shares, suspension of rights attached to such shares\nand other similar actions.<\/li>\n<\/ul>\n\n\n\n<p><strong><em>The Tribunal, after giving the\nopportunities to the party to be heard, place such restrictions on the shares\nwithin sixty days of receipt of the application from the company, if necessary.\n<\/em><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Penalties_for_Non-Compliance_under_Section_90_of_the_Companies_Act_2013\"><\/span>Penalties for Non-Compliance under\nSection 90 of the Companies Act, 2013<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Following are some penalties for\nnon-compliance under Section 90 of the Companies Act, 2013:<\/p>\n\n\n\n<ul>\n<li>If a\nsignificant beneficial owner fails to make declarations as mandated under\nSection 90(1), she shall be liable for a penalty fine of Rs. 50,000\/- and in\ncase of continuing failure, there shall be a penalty of Rs. 1000\/- for every\nsubsequent day of failure, up to a maximum of Rs. 200000\/-.<\/li>\n\n\n\n<li>If a\ncompany, which is required to maintain a register under Section 90(2) or file\ninformation under (4) or carry out its obligations under (4A) fails to do so\nshall pay the penalty up to Rs. 100000\/- and in case of continuing failure,\nthere shall be a penalty of Rs. 500\/- for every subsequent day of failure, up\nto a maximum of Rupees.500000\/-.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Section 90 of <strong>the Companies Act, 2013<\/strong><sup><a class=\"text-primary\" href=\"https:\/\/www.mca.gov.in\/Ministry\/pdf\/CompaniesAct2013.pdf\"><strong>[1]<\/strong><\/a><\/sup> and the SBO Rules were placed in to remove the corporate veil and unmask the real beneficial owners of the company. The onus is shifted from the Central Government and is placed on the significant beneficial owners and the company to make the necessary declarations or pay the penalty as provided for.<\/p>\n\n\n\n<p class=\"text-left\"><b>Read Our Article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/types-of-companies-under-companies-act-2013\/\">Types of companies under Companies Act, 2013<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Section 90 of the Companies Act, 2013 deals with the &#8220;register of beneficial owners in a company&#8221; and it states that the significant beneficial owners are required to make a declaration as to their beneficial interest in the company, the nature of interest held and the period of acquisition of such interest. Section 90 of [&hellip;]<\/p>\n","protected":false},"author":47,"featured_media":50934,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[2897],"acf":{"service_id":"1"},"authorName":"Sherin Jose","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2022\/11\/MicrosoftTeams-image-4-e1668575330329.jpg","authorDescription":"Sherin has degrees in Law and English Literature from the University of Delhi. She is adept at legal research and writing and enjoys discussing and analysing important legal developments. Her primary interests lie in Corporate, FinTech and IPR Law and she is always on the lookout for exploring new developments in the area. She is an avid reader who loves classics and contemporary fiction. She likes to travel, bake and obsess over cat videos in her free time.","postViews":10230,"readingTime":5,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/50933"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/47"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=50933"}],"version-history":[{"count":3,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/50933\/revisions"}],"predecessor-version":[{"id":64208,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/50933\/revisions\/64208"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/50934"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=50933"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=50933"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=50933"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}