Leeway for disclosure

The Centre has extended the time to disclose significant beneficial owners (SBO) of companies and also proposed changes in the form to be filled for the disclosure to be made, a day before the official deadline was to end.

By Sambit Saha in Calcutta
  • Published 12.09.18
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Calcutta: The Centre has extended the time to disclose significant beneficial owners (SBO) of companies and also proposed changes in the form to be filled for the disclosure to be made, a day before the official deadline was to end.

The disclosure requirement under the amended Section 90 of the Companies Act had previously set September 11 as the deadline for all registered companies, public and private, to disclose the names of individual(s) who either directly or indirectly hold more than a 10 per cent stake in the entity, or exercise "significant influence or control" over its affairs.

A ministry of corporate affairs circular, issued on Monday night, said a revised form will be circulated shortly and a new timeline will be specified. The circular noted the decision was taken keeping in view the concern expressed by stakeholders in filling up the form.

According to the Companies (Amendment) Act, 2017, individuals are required to make disclosures by submitting the "BEN-1" form to the target company in which they are going to be identified as SBO.

The form also contained all the details of how the individual(s) were becoming the SBO of the target company.

Subsequently, the relevant company is required to disclose the information to the RoC by filing form "BEN-2". The former was a paper filing and the latter was an electronic filing. Given that the second filing was to be made 30 days after the BEN-1, the entire timeline has now been extended.

Ever since these forms were notified on June 13, 2018 along with the Companies (Significant Beneficial Owners) Rules, 2018, corporate India had complained of a lack of clarity on several items.

"Stakeholders are advised to file declarations according to the revised form only and adhere to the timelines which will be specified therein," the circular read.

Corporate observers will keenly watch if the "BEN-1" form also contains any relaxation on the threshold for identifying an SBO.

While the amendment to the Companies (Amendment) Act, 2017 had set the SBO disclosure threshold at 25 per cent, the rules framed on June 13, brought it down to 10 per cent.

"After months of waiting, the MCA has finally acknowledged the difficulties being faced by the stakeholders in filing the form BEN 1. We will have to wait and watch to see whether the changes proposed to be introduced will provide clarity and certainty of the interpretation," Shourya Sengupta, senior associate with Khaitan & Co, said.

The ticking time bomb had jolted industry since it will no longer be able to use the artifice that companies have used till now to mask the ultimate beneficial ownership of a company.