Sig­nif­i­cant ben­e­fi­cial own­ers in com­pa­nies to face strict ac­tion for wrong dis­clo­sures

Millennium Post - - Mp Business -

NEW DELHI: Sig­nif­i­cant ben­e­fi­cial own­ers in In­dian cor­po­rates might face strict ac­tion for in­ad­e­quate or wrong dis­clo­sures about their own­er­ship and com­pa­nies too can seek ac­tion against en­ti­ties in case they fail to pro­vide sat­is­fac­tory re­sponses, ac­cord­ing to rules.

With the cor­po­rate af­fairs min­istry amend­ing the rules for sig­nif­i­cant ben­e­fi­cial own­ers un­der the Com­pa­nies Act, 2013, cor­po­rates are re­quired to take nec­es­sary steps to iden­tify such own­ers and ob­tain a dec­la­ra­tion from them.

Apart from pro­vid­ing more clearer definitions for de­ter­min­ing whether an in­di­vid­ual or an en­tity has sig­nif­i­cant ben­e­fi­cial own­er­ship, cor­po­rates would be re­quired to pro­vide the de­tails in a more elab­o­rate man­ner to the min­istry.

Sig­nif­i­cant ben­e­fi­cial own­ers, who fail to make a dec­la­ra­tion re­gard­ing their own­er­ship, could face fine, im­pris­on­ment or both un­der the Com­pa­nies Act. In in­stances, where such en­ti­ties have will­fully pro­vided in­cor­rect in­for­ma­tion, then such acts would be con­sid­ered as fraud un­der the Act.

Sim­i­larly, com­pa­nies that fail to main­tain reg­is­ters of sig­nif­i­cant ben­e­fi­cial own­ers would also face ac­tion, as per the rules.

Lead­ing con­sul­tancy Deloitte said the spirit of the amend­ment rules is to bring in more clar­ity and is in align­ment with the govern­ment's drive to in­cul­cate trans­parency and ac­count­abil­ity in the cor­po­rate set up.

"The dis­clo­sures re­lat­ing to Sig­nif­i­cant Ben­e­fi­cial Own­ers are ex­pected to lead to trans­parency of share­hold­ing struc­tures and help the govern­ment iden­tify be­nami trans­ac­tions and pre­vent money laun­der­ing ac­tiv­i­ties," it said in a note.

In cases where a sig­nif­i­cant ben­e­fi­cial owner does not pro­vide a re­sponse or if the re­sponse is in­ad­e­quate, then the com­pany con­cerned can ap­proach the Na­tional Com­pany Law Tri­bunal (NCLT) for suit­able di­rec­tions, in­clud­ing freez­ing of their rights re­lated to their shares.

The amend­ments to the rules also come at a time when the govern­ment is clamp­ing down on cor­po­rate en­ti­ties sus­pected to be used as con­duits for il­licit fund flows. The min­istry, which is im­ple­ment­ing the com­pa­nies law, has al­ready dereg­is­tered lakhs of com­pa­nies that have not been car­ry­ing out busi­ness ac­tiv­i­ties for a long time.

Re­gard­ing the amended rules, an of­fi­cial said on Satur­day that the whole prin­ci­ple of pro­por­tional cal­cu­la­tion has been done away with. "It is very clear on how sig­nif­i­cant ben­e­fi­cial own­ers would be iden­ti­fied in var­i­ous cir­cum­stances... The rules seek to lift the cor­po­rate veil," the of­fi­cial had said.

In its note, Deloitte said that ev­ery sig­nif­i­cant ben­e­fi­cial owner is re­quired to make time-bound dis­clo­sures of their hold­ing in the re­port­ing com­pany and any changes.

"The ob­jec­tive is to iden­tify the ul­ti­mate ben­e­fi­cial in­di­vid­ual or group of in­di­vid­u­als who have con­trol or own­er­ship of the re­port­ing com­pany dis­re­gard­ing the in­ter­me­di­ate share­hold­ing by non-in­di­vid­ual per­sons," it added.

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