Governments struggle to combat money laundering, terrorism funding and threats to the integrity of global financial systems. Complex cross-border corporate vehicles are used to facilitate illegal activities, allowing the anonymous movement of illicit funds through the financial system.
Following a 2014 report by the Financial Action Task Force, an independent inter-governmental body intended to encourage governmental action on corporate transparency and disclosure of beneficial ownership, the Ministry of Corporate Affairs (MCA), proposed amendments to the Companies Act, 2013.
In June 2018, MCA notified an amendment to section 90 of the act and the introduction of the Companies (Significant Beneficial Owners) Rules, 2018. The concept of Significant Beneficial Owner (SBO) is wider than “beneficial interest” as defined in section 89(10) and not limited to “significant beneficial interest”. SBO includes not only an individual holding a beneficial interest up to the prescribed percentage in a company, but also those in a position to exercise significant influence over it. Among other requirements, the rules oblige companies to file a return of SBOs with the Registrar of Companies.
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Ritika Ganju is a partner and Tushar Thimmiah is an associate at the Delhi office of Phoenix Legal.
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