Section 90 of Companies Act. Register of significant beneficial owners in a company

—(1) A company may close the register of members or the register of debenture-holders or the register of other security holders for any period or periods not exceeding in the aggregate forty-five days in each year, but not exceeding thirty days at any one time, subject to giving of previous notice of at least seven days or such lesser period as may be specified by Securities and Exchange Board for listed companies or the companies which intend to get their securities listed, in such manner as may be prescribed. (2) If the register of members or of debenture-holders or of other security holders is closed without giving the notice as provided in sub-section (1), or after giving shorter notice than that so provided, or for a continuous or an aggregate period in excess of the limits specified in that sub-section, the company and every officer of the company who is in default shall be liable to a penalty of five thousand rupees for every day subject to a maximum of one lakh rupees during which the register is kept closed

Scope of Section 90 of Companies Act 2013

The main purpose of this section is to maintain the register of beneficial owner. That and beneficial owner can only be recognised if his name has been entered in the register of members maintained by the company in which he holds the beneficial interest of the shares even if the shares owned by other person but for that purpose there shall be a declaration which is to be made to the company for declaring the beneficial owner i.e. the person who will enjoys the rights of a beneficial owner. That such declaration to be made has a procedure to be followed by the person for making such declaration, And the company shall maintain the register and report it to the reporting authority or agent.

Who is required to declare?

A person who owns, directly or indirectly, alone or together with other persons, a beneficial interest in shares of the company not less than twenty-five percent (or such other percentage as may be prescribed), or has the right to exercise control over the company including direct power to determine financial and operating policies of the company (referred hereinafter as “significant beneficial owner” in short), by itself or through other natural persons as trustee(s) owning monies for him/her, shall make declaration to the company with regard to his interest specified therein and such further details including acquisition of such interest as may be prescribed within time limit prescribed. This includes any change relating to these interests.

Alternatively, such declaration shall not apply to any class of persons as may be specified by the Central Government under sub-section (1).

Obligations of companies under section 90 of Companies Act

Each corporation must preserve a record containing particulars specified in subsection (1). These are: first and last names; day/month/year/ when born; place/address where registered office located; name under which conducting business; name of each shareholder.

Accessing this register kept pursuant to sub-section (2) is allowed for any member on payment if so indicated.

The Registrar has mandated that all companies submit an annual report containing the names, addresses, and relevant information of their key beneficial owners within a specific format and timeline. It is crucial for every corporation to proactively identify and verify the identities of their key stakeholders, including significant beneficial owners, and ensure compliance with relevant regulations. Additionally, if a company is not a member of any relevant organization, it should inform any individuals it knows or has reason to believe may have a significant beneficial interest in the business.

This also applies to individuals who are aware of someone else who may know this individual, or who have been substantial beneficial owners within the three years prior to receiving the notice. The company must notify these individuals in writing, unless they are not registered with the company as significant beneficial owners according to the definition provided in this section.

The individual must provide all necessary information within thirty days of receiving the notice, as outlined in sub-section (5), or else the company may seek legal action from the Tribunal within fifteen days after the notice expires. This may include restrictions on the transfer of shares, suspension of associated rights, and any other measures deemed necessary, should the individual neglect to provide satisfactory information within the specified time frame.

When an application is filed under subsection (7), the Tribunal may, upon providing the parties involved with a chance to be heard, issue an order restricting the rights associated with the shares within sixty days of the application’s receipt or within another time frame that may be specified.

Within a year of the date of the order under sub-section (8), the company or the person who is upset by the order may apply to the Tribunal for a relaxation or lifting of the restrictions imposed. Provided, however, that in the event that no such application is filed within that year, the shares will be transferred, free of any restrictions, to the authority established under sub-section (5) of section 125, in the manner that may be prescribed.

The central government at any time if required can make rules for the purpose of this section.

What if the failure occurs by?

As per this provision, an individual if fails to fulfil the requirement under sub-section (1) then it will amount to penalty of 50 thousand rupees and if it’s continuous failure then it will be amount to 1 thousand rupees per day which may go up to maximum fine of 1 lakh rupees in total.

If the party at default is a company under any subject matter in sub-section (2), sub-section (4) or (4A), there will be penalty of 1 lakh rupees with additional penalty of 5 hundred rupees per day. And for the continuous failure maximum amount up to 5 lakh rupees and for the officer of the company at default liable with 25 thousand with additional of 2 hundred per day.

That if the person provides the company with false information by knowingly then there will be a legal action against that person under section 447.

Conclusion

This section talks about the declaration for the beneficial owner that who is bound make such declaration to gain the truthful rights of the beneficial owner. That what is the procedure for filing such declaration, and governs companies to maintain the register of members and file a report to their registrar on timely durations. That failure to maintain register or to make declaration will amounts to penalties to the company as well as to the individual respectively. That also central government at any time if required can alter the rules or make such new rules.

FAQs

Q. What is Section 90 of the Companies Act 2013?

Reporting companies must identify significant beneficial owners and require them to declare in Form No. BEN-1.

Q. Who is required to file Ben-1?

BEN-1: Every person who holds a substantial beneficial interest in a reporting the company which is required to submit such declaration in Form No. BEN-1

Q. Who is a beneficial owner as per the Companies Act?

Any individual who benefits from the ownership even if another person has the title to a piece of property is known as a beneficial owner.

Q. What are the percentage that a beneficial owner minimally holds in the company?

A notification from Revenue Department states that an individual who holds or owns more than 10% of the equity in a corporation will be categorised as “Beneficial Owner”.

Q. Who can make rules in respect of section 90 of Companies Act, 2013?

Rules for the purposes of this section may be made at any time by the central government if necessary.

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Section 90 of Companies Act 2013

Vaibhav Bhatt

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