Registered Owner V.

Beneficial Owner:
Lifting of Veil

What is beneficial ownership in generic parlance? It refers to having some

interest in any property, goods including securities, or favorable interest
may be referred to a "profit, benefit or advantage panning out from a
contract, or the ownership of an estate as distinct from the legal
possession or control.”

Difference between Registered Owner & Beneficial Owner as per

Companies Act, 2013 (‘Act, 2013’)1

Meaning of A person whose name is entered in the Register of Members

Registered owner as the holder of shares in that company but who does not
as per the hold the beneficial interest in such shares is called as the
Companies Act? registered owner of the shares;

Meaning of Beneficial interest has been defined in the following manner

Beneficial owner for section 89 and 90 of the Act, 2013 as follows:
as per the "(10) For the purposes of this section and section 90,
Companies Act? beneficial interest in a share includes, directly or indirectly,
through any contract, arrangement or otherwise, the right or
entitlement of a person alone or together with any other
person to—
(i) exercise or cause to be exercised any or all of the rights
attached to such share; or
(ii) receive or participate in any dividend or other
distribution in respect of such shares.”

1
▪ http://www.mca.gov.in/Ministry/pdf/Notification2106_22062018.pdf
Requirements under the Act, 2013

Sections Requirements Examples

Section 89 of the Act,

2013, requires making of
declaration in cases where
Under Section
the registered owner and
89
the beneficial owner of
shares in a company are
two different persons
For acquiring membership by such
entities (for example: partnership
firm, Hindu Undivided Family (‘HUFs’),
etc) who are not allowed to hold
shares directly of a company.

The first proviso of section

187 allows a holding
company to hold the ● To satisfy the requirement of
shares of its wholly- minimum number of members
owned subsidiary in the (i.e.) 2 (Two) in case of a private
First proviso to
name of nominees, other limited company and 7 (Seven) in
section 187
than in its own name for case of a public limited company
the purpose of meeting ● To incorporate or to have a wholly
the minimum number of owned subsidiary.
members as per the Act,
2013
Mandatory Declarations: Under Section 89 read
with Rule 9 of the Companies (Management and
Administration) Rules, 2014

Section 89 read with rule 9 of the Companies (Management and

Administration) Rules, 2014 deals with declaration of beneficial interest in
the shares held.
▪ The person or the company (as the case may be), whose name is to
be entered into the register of members of the company shall submit
a declaration in Form MGT-4 within thirty days from the date of
acquisition or change in beneficial interest to the company
▪ The person or a company (as the case may be), who holds the
beneficial interest in any share shall submit a declaration in Form
MGT-5 along with the covering or request letter to the company in
which they hold the beneficial interest within thirty days from the
date of acquisition or change in beneficial interest.
▪ On receipt of declaration in Form MGT-4 & MGT-5 by the company,
the Company to make note of such declaration in the register of
members and intimate the Registrar of Companies (‘ROC’) in e-Form
MGT 6 within thirty days from the date of receipt of declaration in
Form MGT-4 & 5.

The basic intent behind the above section is to reveal the identity of the beneficial owner
who is unknown to the company.
Significant Beneficial Owner (SBO)

Section 90 of the Act, 2013 has the following features in broad:

● SBO has been defined;

● Every individual who is a significant beneficial owner in the reporting
company shall file a declaration to the Company in form no. BEN-1;
● Upon receipt of Declaration in the manner specified above, the
reporting Company shall file a return of SBO in form BEN-2 with the
Registrar of Companies (ROC);
● Register in form no. BEN-3 is to be kept for recording the declarations
given under this section;
● Power of companies to seek information from members, believed to
be beneficial owners, in form no. BEN-4;
● Power of companies to approach the Tribunal in case of non-receipt
or inadequate response from the members and non-members; and
● Serious penal provisions for non-compliances with the provision of
the said section.

Section 89 and 90 work in two different fields altogether. While section 89

talks about disclosure of nominal and beneficial interest thereby providing
duality / dichotomy of ownership, section 90 indicates the magnitude of
holding.

Further, section 89 does not require the disclosure only from individuals but
bodies corporate as well. The same is not the case with section 90 which
aims at revealing the individuals as significant beneficial owner(s).
Section 187 of the Act, 2013

Applicable Brief description

• The proviso to sub-section (1) grants exemption to holding

companies in case of holding shares of its subsidiary
companies.
• The exemption allows holding companies to appoint
For Companies
nominees for itself to hold shares in the
subsidiary/wholly-owned subsidiary companies in order to
meet the statutory minimum limit of members in a
company.
Difference between Section 89 and First proviso
to Section 187
Basis of
Difference Section 89
Consists of It deals with making
disclosures by the
registered owner,
beneficial owner and the
company to the ROC
Intention of law To reveal the identity of
the beneficial owner
Share Certificates Share certificates are
generally issued in the
name of the registered
holder.
However, in the case of
trusts, HUFs, partnership
firms holding shares in a
company in the beneficial
capacity, share certificate
contains the name of the
registered holder and the
name of the trust, HUFs
and partnership firms is
written in brackets as
beneficial owner.
First proviso to Section 187
It deals with making and
holding investment by a
holding company in its
subsidiary in the name of
nominees.
To allow holding companies to
become beneficial owner(s) in
case of subsidiaries through a
nominee and at the same time
comply with the minimum
number of members
requirement prescribed in the
Act.
Share certificates are issued
in the name of the registered
holder (nominee) but the
name of the holding company
is also mentioned along with
the name of the nominee.
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