THE FORM BEN – 2

Form BEN – 2 seems to be a comic strip name for kids but for Indian companies and company secretaries, it seems to be a just another nightmare of corporate governance. On 1st July 2019 BEN – 2 finally arrived. This BEN – 2 is an updated version introduced by the Companies (Significant Beneficial Owners) Second Amendment Rules 2019 with effect from the date of publication of the notification in the Official Gazette. In this post we discuss the Form BEN – 2 briefly.

We have earlier discussed the law governing the Form BEN – 2 earlier:

• SIGNIFICANT BENEFICIAL OWNER;
• Declaration by Significant Beneficial Owner; and
• Seeking information of Significant Beneficial Ownership.

These laws were amended earlier and may be accessed here for an academic purpose:

• Significant Beneficial Owner (Before Amendment),
• Declaration by Significant Beneficial Owner (Before Amendment); and
• Seeking information of Significant Beneficial Ownership (Before Amendment).

SUMMARY BACKGROUND

Form BEN-2 is required to be filed pursuant to Section 90(4) of the Companies Act, 2013 and Rule 4 of the Companies (Significant Beneficial Owners) Rules 2018. Section 90(4):

Section 90(4): “Every company shall file a return of significant beneficial owners of the company and changes therein with the Registrar containing names, addresses and other details as may be prescribed within such time, in such form and manner as may be prescribed.”

Rule 4: “Upon receipt of declaration under rule 3, the reporting company shall file a return in Form No. BEN-2 with the Registrar in respect of such declaration, within a period of thirty days from the date of receipt of such declaration by it, along with the fees as prescribed in companies (Registration offices and fees) Rules, 2014.”.

PURPOSE OF THE FORM

There may be three purposes of the filing of the form BEN- 2:

1. For a declaration of holding reporting company
2. For a declaration of Significant Beneficial Ownership under Section 90; or
3. For a declaration in the change in Significant Beneficial Ownership under Section 90.

Purpose 3 may not be selected along with the first two purposes.

PURPOSE -1: DECLARATION OF HOLDING REPORTING COMPANY

Only a company registered in India under the Companies Act, 2013 can be a Holding Reporting Company. Where a reporting company has a holding company registered in India, which is reporting under these rules, such holding company shall be holding reporting company. We need to provide its Corporate Identity Number (CIN). This seems to cross check the information.

In case of a holding reporting company, there is no need to report significant Beneficial Owner (SBO) to the extent of shares held by the reporting company. It means where there is any SBO other than through the Holding Reporting Company (HRC), it needs to be reported.

The declaration of SBO under Section 90 seems to be mandatory to attachment in all cases under the form. This requires correction in the Form.

PURPOSE -2: DECLARATION OF SIGNIFICANT BENEFICIAL OWNERSHIP UNDER SECTION 90

A reporting company may have more than one SBO but not more than nine. Why there may not be a tenth SBO? This is simple arithmetic.

These nine SBO may be through one or more common or unrelated registered member of the company acting as the front of the SBO.

The reporting company needs to provide details of these registered members of the company who are actually acting as a front for the SBO.

Details of the Member

We need to fill details of the member:

• How SBO has held the rights or control over the member of the reporting company;
• The origination structure of the member;
• Registration details of the members;
• Address; and
• Date of entry of the name of the member in the register of members of the reporting company.

Details of SBO

The reporting company need to disclose the status of the SBO in the member organization.

Depending upon this status we need to fill detail information about SBO

Particulars of SBO

Thereafter, the personal details of SBO are required to be filled along with the following details:

• Date of acquiring Significant Beneficial Interest
• Date of declarations under sub-section (1) of Section 90
• Date of receipt of the declaration by the company
• Whether Significant Beneficial Owner has any direct holding or right in the reporting company, If yes, enter these details.

PURPOSE -3: DECLARATION OF CHANGE IN SIGNIFICANT BENEFICIAL OWNERSHIP UNDER SECTION 90

These Details are similar to purpose 2 mentioned hereinabove.

ATTACHMENT

The Declaration under Section 90 is a mandatory attachment always. This seems unfair for the companies reporting their holding reporting companies and needs correction.

DECLARATION

This is a usual declaration as mentioned in most of these MCA forms.

CERTIFICATE BY PRACTICING PROFESSIONAL

This is also a usual certification as required in most of these MCA forms.

DATE OF FILING

The Form is required to be filed within 30 days of receiving a declaration under section 90 of the Companies Act, 2013.

DUE DATE FOR RECEIVING DECLARATION

This is interesting to note that due date for receiving this declaration is already passed in May 2019. The significant number of companies has not asked and accordingly not received these declarations due to uncertainty over the law.

We need a relaxation, not in the time for filing Form BEN – 2 but receiving the declaration.

First and one-time Trigger

According to Rule 3(1), every individual who is a significant beneficial owner in the reporting company on the date of commencement of these amendment rules shall file a declaration in Form BEN-1 to the reporting company within ninety days from the commencement of these rules.

• Such an individual must be a significant beneficial owner in the reporting company on 8^thFebruary 2019;
• Such individual should file BEN – 1 within 90 days with the reporting company – due date as of now will be 8^thMay 2019

Earlier dates are now not relevant after this amendment.

On becoming a Significant Beneficial Owner

According to Rule 3 (2), every individual, who, after the commencement of these rules, becomes a significant beneficial owner in the reporting company, shall file a declaration in Form BEN-1 to the reporting company within thirty days of acquiring such significant beneficial ownership or in case of any change in such ownership.

Any change is not defined and/or quantified. All qualitative or quantitative changes need to be declared within 30 days.

Reporting during the transition period

This is good clarification on an interesting interpretation of earlier rule as well as present rules.

According to the explanation to Rule 3(2), any acquisition or change during the transition period of 8^th February 2019 and 8 May 2019 shall be deemed to happen on 8^th May 2019 and shall be reported within 30 days from that day. Accordingly, in such case two BEN – 1 shall be filed – first for declaring position as on 8^th February 2019 and second for declaring position during the period from 8^th February 2019 and 8^th May 2019. The due date for second BEN – 1 in such cases as of now shall be 7^thJune 2019.

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