Seeking information of Significant Beneficial Ownership

Section 90 of the Companies Act 2013 substituted by a new set of law. It is a drastic change to understand and need urgent attention for all companies. Amended Section 90 and rules made thereunder has already been notified with effect from 13^th June 2018 and 14^th June 2018. The significant deadline is on 12^th September 2018. Earlier, we discussed Significant Beneficial Interest, declaration, register and return related thereto here and here. Seeking a declaration from a significant Beneficial Ownership is debatable otherwise but the law provides some remedies discussed in this post.

Notice for seeking information

Subsection (5) of Section 90 of the Companies Act, 2013 as amended empower the company to give notice for seeking information of Significant Beneficial Ownership.

A company shall give notice, in the prescribed manner, to any person (whether or not a member of the company) whom the company knows or has reasonable cause to believe—

(a) to be a significant beneficial owner of the company;

(b) to be having knowledge of the identity of a significant beneficial owner or another person likely to have such knowledge; or

(c) to have been a significant beneficial owner of the company at any time during the three years immediately preceding the date on which the notice is issued;

and who is not registered as a significant beneficial owner with the company as required under this section.

The Notice shall be issued in form BEN – 4 prescribed in Rule 6 of the Companies (Significant Beneficial Owners) Rules 2018.

The Notice shall be issued for seeking information about a person who believed to be Significant Beneficial Owner but not registered with the company as such. The notice shall be issued to the following person:

• A person is known as a Significant Beneficial Owner but not declared as such;
• Person reasonably believed to be a Significant Beneficial Owner;
• Person having knowledge of the identity of a Significant Beneficial Owner;
• Person likely to have knowledge of the identity of a Significant Beneficial Owner; and
• Person who was Significant Beneficial Owner at any time during 3 years immediate preceding but not registered as such.

Section 90 (6) cast a duty on the recipient of the notice BEN – 4 to the concern person within a period not exceeding thirty days of the date of the notice. The use of term concern person is interesting. However, it should be understood as the company issuing notice BEN – 4.

Application to the Tribunal

The company shall apply the tribunal –

• the person receiving the notice fails to give the company the information required by the notice within the time specified therein; or
• where the information given is not satisfactory.

The company in the application under Section 90((7) read with Rule 7, shall seek an order directing that

• the shares in question be subject to restrictions with regard to transfer of interest,
• suspension of all rights attached to the shares; and
• such other matters as may be prescribed:
  • restrictions on the transfer of interest attached to the shares in question;
  • suspension of the right to receive dividend in relation to the shares in question;
  • suspension of voting rights in relation to the shares in question;
  • any other restriction on all or any of the rights attached with the shares in question.

On the application, the Tribunal may, after giving an opportunity of being heard to the parties concerned, make such order restricting the rights attached with the shares within a period of sixty days of receipt of application.

The company or the person aggrieved by the order of the Tribunal may make an application to the Tribunal for relaxation or lifting of the restrictions placed.

Punishment

If any person fails to make a declaration, he shall be punishable with fine which shall not be less than one lakh rupees but which may extend to ten lakh rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues. {Section 90(10)

If any person wilfully furnishes any false or incorrect information or suppresses any material information of which he is aware in the declaration made under this section, he shall be liable to action under section 447. [Section 90(12)}

Notice for Seeking information of a Significant Beneficial Owner