Ministry of Corporate Affairs (MCA) issued a notification notifying the Companies (Significant Beneficial Owners) Rules, 2018 with effect from 13th June, 2018.
This step is taken by MCA after notifying Section 90 of Companies Act, 2013 with effect from 13th June, 2018. Section 90 deals with "significant beneficial owner".
These rules are in respect to provide for significant beneficial ownership aimed at tracking the real beneficiaries of shares as often benami holdings are found in shell companies. The new section (Section 90) that was inserted in the Companies Act is also part of the global fight against money laundering and came at the behest of Paris based Financial Action Task Force with countries such as the UK already incorporating the provisions.
This section and the rules provide for maintaining of a register of “beneficial owners”. MCA has set the limit at 10% to whom such rules will be applicable, thereby increasing the ambit of the provisions to cover a larger base of shareholders, who may be warehousing the shares for someone else.
These rules provide for mandatory disclosure within a stipulated period and once the rules are notified there will be a rush of filings as shares in most companies are not widely held. A failure to disclose beneficial ownership can result in a fine of up to Rs 50,000 with a daily penalty of Rs 1,000, if the failure to comply with the rules continues. The Companies Act also allows the Centre to investigate cases of beneficial ownership.
The copy of rules can be found below.
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