BENEFICIAL INTEREST IN SHARES


According to Section 89 of the Companies Act, 2013, where the name of a person is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares, such person shall make a declaration within such time and in such form as may be prescribed.

Rule 9 of the Companies (Management and Administration) Rules 2014 supplements provisions of Section 89 of the Act.

A person whose name is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares (hereinafter referred to as “the registered owner”), shall file with the company, a declaration to that effect in Form MGT – 4 in duplicate, within a period of thirty days from the date on which his name is entered in the register of members of the company. [Sub – Rule (1)]

Where any change occurs in the beneficial interest in such shares, the registered owner shall, within a period of thirty days from the date of such change, make a declaration of such change to the company in Form MGT – 4 in duplicate. [Proviso to sub – rule (1)]

Every person holding and exempted from furnishing declaration or acquiring a beneficial interest in shares of a company not registered in his name (hereinafter referred to as “the beneficial owner”) shall file with the company, a declaration disclosing such interest in Form MGT – 5 in duplicate, within thirty days after acquiring such beneficial interest in the shares of the company. [Sub – Rule (2)]

Where any change occurs in the beneficial interest in such shares, the beneficial owner shall, within a period of thirty days from the date of such change, make a declaration of such change to the company in Form MGT – 5 in duplicate. [Proviso to sub – rule (2)]

Where any declaration under section 89 is received by the company, the company shall make a note of such declaration in the register of members and shall file, within a period of thirty days from the date of receipt of declaration by it, a return in Form MGT – 6 with the Registrar in respect of such declaration with fee. [Sub – rule (3)]

Form MGT – 4

Declaration by the registered owner of shares who does not hold the beneficial interest in such shares

1. Particulars of the Registered owner of shares:

(i)           Name :

(ii)          Father’s / Mother’s / Spouse’ name:

(iii)         Occupation:

(iv)         Whether citizen of India

(v)          Nationality

(vi)         Date of Birth __________

(vii)        Gender Male Female

(viii)       PAN

(ix)         Proof of Identity

(x)          Permanent Residential Address, ISO Country Code Country, Phone MobileFax Email ID

(xi)         Whether present residential address is same as the permanent residential address. If no, present residential address, ISO Country Code Country, Phone Mobile, Fax Email ID

2. Particulars of the shares in respect of which declaration is being made by the registered owner:

i)             Class of shares:

ii)            Number of shares:

iii)           Distinctive numbers: From………. To………..

iv)           Certificate No.:

v)            Folio No.

vi)           Nominal value of shares:

vii)          Paid up value of shares:

3. Declaration:

In pursuance of sub-section (1) of section 89 of the Companies Act, 2013, I ………………hereby declare that the person (s) name below hold(s) the beneficial interest in the above mentioned shares registered in my name in the register of members of the company:

  1. S. No.
  2. Name of beneficial owner(s)
  3. Address and E – mail ID
  4. Date of Birth/ Age
  5. Father’s /Spouse’s name
  6. Occupation,
  7. Nationality,
  8. PAN/UID/CIN (In case of foreign national)
  9. Distinctive Numbers

 

4. Details of the beneficial interest:

i) Nature of the beneficial interest:

ii) Date of creation of the beneficial interest:

iii) Reasons for not registering shares in the name of the beneficial owner(s):

iv) Particulars of the instrument/ document, if any, showing the creation of such beneficial interest:

 

5. Particulars of change in beneficial interest:

i) Date of change:

ii) Nature of the change in the beneficial interest:

iii) Brief particulars of such change:

iv) Reason for such change:

v) Particulars of the instrument/ document, if any, showing the change in such beneficial interest:

 

The form shall be signed by the registered owner of shares/securities. Following documents shall be enclosed:

  1. Proof of identity of registered owner and beneficial owner,
  2. Instrument/document under which beneficial interest is created /transferred/ changed.

 

 

Form MGT – 5:

Declaration by the beneficial owner who holds or acquires beneficial interest in shares but whose name is not entered in the register of members

 

1. Particulars of the shares in which beneficial interest is held by the person making declaration:

i) Class of shares:

ii) Number of shares:

iii) Distinctive numbers: From………. To………..

iv) Certificate No.:

v) Folio No.

vi) Nominal value of shares:

vii) Paid up value of shares:

 

2. Particulars of the beneficial owner

  1. S. No.
  2. Name of beneficial owner(s)
  3. Address and E – mail ID
  4. Date of Birth/ Age
  5. Father’s /Spouse’s name
  6. Occupation,
  7. Nationality,
  8. PAN/UID/CIN (In case of foreign national)
  9. Passport Number

3. Declaration

In pursuance of sub-section (2) of section 89 of the Companies Act 2013, I …………………hereby declare that I hold / have acquired the beneficial interest in the above mentioned shares of the company which are registered in the name of the person whose particulars are furnished below:

 

4. Particulars of the registered owner:

  1. S. No.
  2. Name of beneficial owner(s)
  3. Address and E – mail ID
  4. Date of Birth/ Age
  5. Father’s /Spouse’s name
  6. Occupation,
  7. Nationality,
  8. PAN/UID/CIN (In case of foreign national)
  9. Passport Number

 

5. Details of the beneficial interest:

i) Date of creation / acquisition of beneficial interest:

ii) Mode of acquisition of beneficial interest: Allotment / Transfer / others, specify

iii) Nature of the beneficial interest:

iv) Reasons for not registering shares in my name:

v) Particulars of the instrument/ document, if any, showing the creation of such beneficial

interest:

6. Particulars of the person from whom the beneficial interest is acquired, if applicable:

i) Name of the transferor of beneficial interest:

ii) Whether shares were registered in his name:

(If not, whether any declaration under sub-section (2) of section 89 was filed by him to the company. If so, date of such declaration)

iii) Particulars of the instrument/ document, if any, showing the transfer of such beneficial interest :

7. Particulars of change in beneficial interest:

i) Date of change:

ii) Nature of the change in the beneficial interest:

iii) Brief particulars of such change:

iv) Reason for such change:

v) Particulars of the instrument/ document, if any, showing the change in such beneficial interest:

 

The Form shall be signed by beneficial owner. Following documents shall be enclosed:

  1. Proof of identity of registered owner and beneficial owner,
  2. Instrument/document under which beneficial interest is created /transferred/ changed.

 

 

Form MGT – 6

Return to the Registrar in respect of declaration under section 89 received by the company

 

Particulars of beneficial interest:

  1. S. No.
  2. Date of declarations under sub – section (1), (2) or (3) of Section 89,
  3. Date of receipt of said declaration by the company,
  4. Particulars of shares in respect of which beneficial interest is created:
  5. Class of shares
  6. Number of shares
  7. Distinctive numbers of shares
  8. Face value of shares
  9. Paid up value of shares
  10. Particulars of registered owner
  11. Name and Nationality
  12. Address and e – mail ID
  13. Father’s Mother’s Spouse’s name
  14. Date of entry in the register
  15. Folio number
  16. Particulars of beneficial owner
  17. Name and nationality
  18. Address and e – mail ID
  19. Father’s/ Spouse’s Name
  20. Date and Nature of beneficial interest
  21. Remarks

Enclosures:

1. Declaration under section 89 (1);

2. Declaration under section 89 (2);

3. Declaration under section 89 (3);

4. Optional attachments, if any.

 

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

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37 responses to “BENEFICIAL INTEREST IN SHARES

  1. Hi Aishwarya,
    what in case of transfer of shares where the registered ownership of shares was transferred to another person (say Y) but beneficial interest was not transferred, and such shares were converted into demat from physical form before giving intimation of beneficial interest to the company in MGT-4 & 5. How would company record the beneficial ownership in such a case as shares are now in demat (on receipt of the declaration of beneficial interest in such shares from both beneficial holder and registered holder), and members’ register is maintained by R&TA.
    In de-mat the Depository is termed as the registered owner and the de-mat account holder as beneficial holder. in such situation how the beneficial interest of X. (let us say Registered holder is Y and beneficial holder is X)
    (i) whether the beneficial interest will be recorded in NSDL folio of such de-mat (registered holder i.e Y) as remarks, (ii) or the shares should be rematerialised? (iii) or whether a de-mat account of the beneficial interest holder (i.e. Y) is required to be opened? whether in third option it will be considered as transfer of securities again from Y to X?

    I have come across this article (http://taxguru.in/company-law/declaration-beneficial-interest-companies-act-2013.html) which says that the beneficial interest will still be recorded as per section 89 of Companies Act, 2013, in NSDL folio. But in whose NSDL folio it will registered is not mentioned. And the Company since it is not having the beneficial holder as the member of the company how will it allot the LF number to it?

    Like

    • Beneficial Hokder/Owner of shares in Demat Account is member of company but Holder of Beneficial Interest in these shares is not.
      Company shall require RTA make entry of beneficial interest in share against relevant Beneficial Owner in its register and Demat Account as per intimation received.

      Like

  2. How to get the beneficial owner registered back as registered shareholder when current registered holder is not willing to sign Form MGT-4

    Like

  3. In transferring shares to a daughter or son shall I made consideration amount of the shares as the no amount received .
    What is your opinion.

    Like

  4. Hey I have a query. Suppose, one person became a registered holder and transferred his beneficial interest to another person two years ago. Now, that registered holder transfers his registered holding in shares to another person. Now, the beneficial interest remains the same. In form MGT-4, what is the date to be written for creation of beneficial interest? The date when beneficial interest was first created or the date of current transfer?

    Like

  5. pls share the board resolution which is attached in MGT-6

    Like

  6. Dear Sir,

    In respect of the rights issue u/s 62 of the CA2013 the shares have to be offered to the holders of the shares. But the Company has nominee or non beneficial holders as all the formalities and filings in respect of the same has been done.

    In this regard, will it be appropriate to give the offer of rights shares to the nominee or non-beneficial holders?

    The answer i have received from majority of people from our fraternity is that since s.62 talks about holder of shares, everyone will be entitled to the rights share, but we feel that since they dont have any rights in respect of the shares we should not be offering the shares under rights issue to them.

    You views are solicited.

    Regards

    Like

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  8. Arvind George Alexander

    Hi sir, could you help me clarify when for a public company, the quorum requirements of shareholders are that out of requirement of 5 members, (less than 1000 shareholders) only 1 is beneficial owner and rest 4 are registered owner, does it constitute a proper quorum?

    Like

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  10. venkateswarlu

    Sir, There is Indian company having three shareholders holding each 3333 shares, 3333 and 3334 shares. Now There is foreign Company wants to acquire all shares from existing shareholders, so that Indian company becomes 100% subsidiary. But Indian company must have atleast two shareholders. How do address in such case, meeting both Company Law and RBI, as this comes under FDI rules.
    Thanks
    Venkateswarlu

    Like

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  12. Sir, I have query regarding this section.
    There is Section 8 Company say M/s. X in which 99.99% of equity shares is held by M/s. A and 0.01% shares held by one of the Director M/s. X.

    Sir, Please suggest what needs to be done, If M/s. A wants to make M/s. X as its wholly owned subsidiary, at the same time the number of members should not be less than Two.

    Is filing of MGT-4 by Director and MGT-5 by M/s. A is sufficient? or transfer of shares is also required?

    Like

  13. Sir I have a query – where a foreign parent hold 99.99% shares in WOS in India and another non resident holds 0.01% shares as nominee whereas the beneficial ownership lies with the foreign parent. Now the the foreign parent wants to change the non resident nominee to another non resident nominee. What is the procedure in this regard ? And any income tax implications for change in nominee ?

    Like

    • Transfer of Share by nominee in favour of other and notice of beneficial interest again.
      There is no income tax implication on WOS but on transferor, which may be adjusted by correct pricing.

      Like

      • If the beneficial interest lies with parent Company, where is the need of filing MGT forms. Going by the reading of section 89 and the relevant rules, the forms are required to be filed when there is a change in beneficial interest.
        Please clarify..

        Similarly when parent company transferred back the same share to itself (in the scenario where there are more shareholders added to the company and there is no need to have nominee shareholders). In that case also there is no change in beneficial interest change. Do we need to file the MGTs….?

        Like

  14. CS Amber Ahmad

    I have a query regarding the date of beneficial interest arising, which is required to be mentioned in MGT 4, in respect of subscribers to moa of a wholly owned subsidiary public limited company. Should the date of beneficial interest arising be date of incorporation of company or the date of paid up capital being paid into the company account and subsequent filing of INC 21?

    Like

    • This is an interesting query.
      Date of beneficial interest arise from date of subscription. In subscription detail, it is disclosed that subscriber is nominee of a company or other person.
      However Need for MGT – 4 arise only after name entered into register of member as stipulated by Section 89 referred in this post itself.

      Like

      • Thank you so much for your prompt reply, can you kindly elaborate on the difference it creates if the subscriber is nominee or the other person? does it then cause any change in date of beneficial interest?

        Like

  15. Nivneet Kothari

    sir
    The concept of beneficial interest as under section 89 read with rules is applicable to joint holder also.

    Like

  16. Himanshi Khanna

    Sir, I have a query regarding this. What is the applicability of this section if a SEBI registered market intermediary acquires shares of companies on behalf of its clients in its own name? In this case, the intermediary shall be the registered owner and the client (the actual investor) shall be the beneficial owner. Do they need to file MGT-4 and MGT-5 to the company?

    Like

    • This depend upon wording of scheme. Mutual Funds are usually owners at their own right. Portfolio Management Scheme usually are ostensible owners, and beneficial owner replace them “almost soon” as per scheme. Such case may have no need of these forms.
      Read scheme carefully.
      Where, intermediary is agent of its client as principal, Rule 9 attracts.

      Like

  17. Sir What is the process for transferring non beneficial shares ?

    Like

  18. CS Shazia Afzal

    pls read MGT-14 as MGT-4 &
    MFT-6 as MGT-6

    Like

  19. CS Shazia Afzal

    I have a query regarding this section that for a wholly owned Government Co. where total capital is held by the Governor & for the sake of subscriber to the memorandum & Articles of Association the shares are held by the nominees of Governor in their names who do not have beneficial interest in these shares.

    So , Do these nominees require to file form MGT-14 to the Co.
    Simultaneously the Governor should file MFT-6 to ROC

    Kindly suggest the applicability of this section with regard to already existing Govt. Co.

    Like

    • Yes; I would reply affirmative, presently.

      Unless Central Government provide relief to government companies using its powers under Section 462 of this Act; all these provisions shall apply to government companies or wholly owned government companies too.

      Any relief given under old Act is not valid, unless some Notification issued under this Act give them some effect under this Act.

      I hope, Government may provide relief, soon

      Like

      • CS Shazia Afzal

        Thanx Sir , but my query is that due to enactment of new Companies Act 2013 and section 89 & Rule 9 applicable from 01.04.2014 .Does the existing Go. Company required to file MGT 4 & MGT 6 with respect to shares already held by the nominees/Governor before 01.04.2014 (as a subscriber/ further allotment of shares ) ?
        or it would be applicable for shares allotted/transferred only after 01.04.2014 ?

        Like

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