Procedure for Filing of Declaration of Beneficial Interest under the Companies Act, 2013

Transparency in ownership and control of companies is a fundamental and core principle of the corporate governance under Indian company law. To prevent misuse of corporate entities, curb benami holdings and ensure regulatory accountability, the Companies Act, 2013 mandates disclosure of beneficial interest in shares.

Section 89 of the Act mandates that both the registered shareholder and also the beneficial owner must disclose and report their respective interests to the company, which must, in turn, notify the Registrar of Companies (ROC) within the prescribed time limits.

Meaning of Beneficial Interest

A beneficial interest refers to the right or entitlement of a person who enjoys the benefits of ownership of shares, even though the shares are registered in the name of another person.

• Registered Owner: Person whose name appears in the register of members
• Beneficial Owner: Person who enjoys voting rights, dividends or other benefits

Legal Framework

• Section 89 of the Companies Act, 2013
• Rule 9 of the Companies (Management and Administration) Rules, 2014

These provisions apply to all companies, including private companies.

When Does Declaration Become Applicable?

• Where beneficial interest exists but the holder is not the registered owner
• Where the registered owner does not hold beneficial interest
• Where there is any change in beneficial interest

Prescribed Forms

Step-by-Step Procedure for Fiing Declaration of Beneficial Interest

Step 1: Declaration by Registered Owner (Form MGT-4)

Where the registered holder does not hold beneficial interest, he shall file Form MGT-4 with the company.

• Discloses details of beneficial owner and nature of interest
• Time limit: Within 30 days of acquisition or change

Step 2: Declaration by Beneficial Owner (Form MGT-5)

The beneficial owner shall file Form MGT-5 with the company.

• Contains details of registered owner and extent of beneficial interest
• Time limit: Within 30 days of acquiring or changing beneficial interest

Step 3: Board Noting and Record Maintenance by the Company

Upon receipt of Forms MGT-4 and MGT-5, the company shall: -

• Place the declarations before the Board of Directors for noting
• Verify the declarations received from the registered owner and beneficial owner
• Pass a Board Resolution authorising a director or company secretary to file Form MGT-6 with the Registrar of Companies
• Make necessary entries in the register of members and other statutory registers in accordance with Section 89(6) read with Rule 9(3)

Step 4: Filing Return with Registrar of Companies (Form MGT-6)

The company shall file Form MGT-6 with the ROC: -

• Within 30 days of receipt of MGT-4 and MGT-5
• Through the MCA portal
• Pursuant to the Board Resolution passed for this purpose

The form contains: -

• Details of registered owner
• Details of beneficial owner
• Nature of beneficial interest

Timeline Summary

Penalties for Non-Compliance

1. Registered / Beneficial Owner

• ₹50,000 + ₹200 per day (max ₹5,00,000)

2. Company & Officers in Default

• Company: ₹1,000 per day (max ₹5,00,000)
• Officer: ₹1,000 per day (max ₹2,00,000)

Exemptions

Declarations are not required for certain SEBI-registered funds such as mutual funds, AIFs and venture capital funds, subject to the applicable rules and regulations.

Recent Amendment – Rule 9(4)

Companies must designate a responsible person to provide and verify beneficial interest details for compliance and annual return purposes.

Section 89 vs Section 90 (SBO)

Conclusion

The declaration of the beneficial interest under the Companies Act, 2013 is a crucial compliance mechanism ensuring transparency in corporate ownership. By following the prescribed procedure, maintaining proper records and filing statutory forms within timelines, companies can avoid penalties and ensure robust corporate governance. For professional help, do contact to Remind Legal, our experts will help you.