The new rules lift a shroud on the identity of significant beneficial owners of a company, allowing regulators to access information on them
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The Ministry of Corporate Affairs (MCA) on 13 June brought into effect the Companies (Significant Beneficial Owners) Rules, 2018 (SBORs). The Companies (Amendment) Act, 2017, had introduced the concepts of beneficial interest in shares and significant beneficial owner under sections 89 and 90 of the Companies Act, 2013, with a view to promoting corporate transparency and preventing misuse of corporate vehicles for illicit purposes such as corruption, tax evasion and money laundering.

Rule 2(c) of SBORs defines a “registered owner” to be a person whose name is entered in the register of members of a company as the holder of shares but who does not hold a beneficial interest in such shares. Rule 2(e) defines a “significant beneficial owner” as an individual referred to section 90 (1) (holding ultimate beneficial interest of not less than 10%) read with section 89 (10), but whose name is not entered in the register of members of a company as the holder of such shares.

Sections 89 and 90 define a “beneficial interest” in a share as including, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to: (1) exercise or cause to be exercised any or all of the rights attached to such share; or (2) receive or participate in any dividend or other distribution in respect of such share.

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The business law digest is compiled by Nishith Desai Associates (NDA). NDA is a research-based international law firm with offices in Mumbai, New Delhi, Bengaluru, Singapore, Silicon Valley, Munich and New York. It specializes in strategic legal, regulatory and tax advice coupled with industry expertise in an integrated manner.

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