June 2019

DECLARATION OF SIGNIFICANT BENEFICIAL OWNERSHIP IN A COMPANY

P.N. SHAH
Chartered Accountant

1. BACKGROUND

1.1 Section 90 of the Companies Act, 2013 (Act), when enacted from 01.04.2014, provided for investigation of beneficial ownership of shares in certain cases. This section corresponded to section 187D of the Companies Act, 1956.This original section is replaced by a new section by the Companies (Amendment) Act, 2017 effective 13.06.2018. This new section provides that every individual or trust having significant beneficial ownership of shares in a company (private or public) has to file a declaration for such holding in the manner prescribed in the Rules.

 

1.2 By a Notification dated 13.06.2018, the Companies (Significant Beneficial Owners) Rules, 2018 were notified. These Rules came into force on 13.06.2018. There were a lot of ambiguities about some of the provisions in these Rules. Therefore, they were not made operative and have been amended by a Notification dated 8.02.2019. Accordingly, the Companies (Significant Beneficial Owners) Amendment Rules, 2019 have now come into force from 8.02.2019.

 

1.3 Section 90 has been further amended by the Companies (Amendment) Ordinance, 2018 effective 02.11.2018. Section 90 and the above Rules contain provisions which require certain individuals having significant beneficial ownership in shares of a company to make a declaration in the prescribed form. In this article some of the important provisions relating to declaration of significant beneficial ownership in a company are discussed.

 

2. DECLARATION OF BENFICIAL INTEREST IN ANY SHARE

2.1 Section 89 of the Companies Act, 2013 provides for declaration to be filed by a shareholder in respect of beneficial interest in any shares of a company (whether public or private). Under this section, if a shareholder of a company has no beneficial interest in the shares of a company held by him / her, such shareholder has to file with the company a declaration in Form No. MGT-4 giving particulars of the beneficial owners of the shares within 30 days of acquiring these shares. A similar declaration is also required to be filed with the company within 30 days whenever there is a change in the particulars of the beneficial owners. Similarly, the person having beneficial ownership in shares of a company held in the name of any other person is required to file a declaration in Form No. MGT-5 within 30 days of acquiring such beneficial interest. On receipt of the above

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