Govt gives companies three more months to inform about significant beneficial owners

The rules are in line with recommendations of the Financial Action Task Force (FATF) for combating money laundering and financing terrorism.

The ministry of corporate affairs (MCA) has extended the time offered to companies to provide information about persons who control 10% or more stake in the entity by 3 months. The process of informing the MCA about significant beneficial owners (SBOs) is part of the exercise to bring in more transparency about persons with significant control over a firm.

An official source said that MCA received representations on extension of the deadline regarding filing information about SBOs. It ended on December 31, 2019. Accordingly, MCA has allowed companies to furnish this information by March 31 and no additional fees would be charged for this. Companies provide this information to the MCA through form BEN-2.

The Institute of Company Secretaries had also demanded an extension in form BEN-2 on the grounds that there were disturbances in internet services in various parts of the country which impacted the filing on MCA portal.

Companies (Significant Beneficial Owners) Rules 2018 aims to bring in transparency among individuals who are exercising significant influence or control over a company. The rules are in line with recommendations of the Financial Action Task Force (FATF) for combating money laundering and financing terrorism.

SBO can be an individual, acting alone or together with others, including trusts and persons residing outside India, who holds beneficial interests of not less than 10% in the shares of the relevant company or holds the right to exercise significant influence over the firm. SBOs are required to file a declaration in form BEN-1 to the reporting company within 90 days and any change thereof also needs to be filed within thirty days of such change.

AMRG & Associates chief executive Gaurav Mohan said that a set of checks and balances within the corporate structure helps create long-term value for stakeholders in a company, which further attracts investment and propel businesses.

“Indian government is swift in writing codes for corporate governance but is also prone to frequent extensions on flimsy grounds which creates an exasperation for the stakeholders. The government needs to implement changes under a policy and mandate compliance from corporates within time-limits, without any need for extensions,” he added.

However, Nangia Anderson director Sandeep Jhunjhunwala said, “This second-time extension by the ministry of corporate affairs till fiscal year-end would provide a respite to the reporting constituents on the provisions aimed to identify and disclose names of the person driving an entity as a step towards piercing the corporate veil”.