Significant beneficial ownership rules revamped

The Ministry of Corporate Affairs (MCA), on 8 February 2019, notified the Significant Beneficial Ownership (Amendment) Rules, 2019, (amended rules) which overhauled the amended section 90 of the Companies Act, 2013, notified June 2018.

Section 90 requires every individual, acting alone, together with, or through one or more persons or trusts (individual), to make a declaration if the individual holds beneficial interest in 25% of the shares (or such other percentage as may be prescribed in the rules) of a company, or exercises significant influence or control in the company.

The definition of a significant beneficial owner (SBO) of a company has been clarified and detailed under the amended rules and includes every individual, who:

• indirectly or together with any direct holdings (i) holds at least 10% of the shares, including global depository receipts, compulsorily convertible preference shares and compulsorily convertible debentures, or voting rights in the shares of the company, or (ii) has the right to participate in at least 10% of the total dividend and other distributions in a financial year; or
• has the right to exercise, or exercises significant influence (the power to participate in, but not control, the financial and operating policy decisions of the relevant company) or control over the company in any manner other than through its direct shareholding alone in the company.

An individual is said to have indirectly a right or entitlement in the shares, voting rights or distributions, as the case may be, of a relevant company where: