22 July 2024
India Strengthens Transparency on Company Ownership: MCA Updates SBO Disclosure Requirements
 
The Ministry of Corporate Affairs (MCA) issued a new notification, amending the Companies (Significant Beneficial Owners) Rules, 2018 and amending the Companies (Management and Administration) Rules, 2014. This significant update introduces changes, particularly in the filing requirements for Form No. MGT-6. This significant update and introduces crucial changes, particularly in the filing requirements for Form No. BEN-2 and MGT-6.

The MCA is taking a big step towards transparent company ownership and better enforcement. They've revamped the rules for disclosing who ultimately owns and controls businesses.

This means companies now need to file new forms with the Registrar of Companies (RoC). These forms (BEN-2 and MGT-6) detail information on 'Significant Beneficial Owners' (SBO) (those with major control) and overall 'Beneficial Ownership.' This makes it easier for companies to keep their ownership records up-to-date and reflects any changes in control. The changes promote transparency and ensure companies comply with regulations.

Highlights of the notification

A. BEN-2 Form Updation
  • Substitution of the existing Form No. BEN-2 with a new form.
  • The new form BEN-2 requires the following two additional disclosures:
    • For a change in particulars of existing SBO under Section 90
    • Change of the existing holding reporting company
  • All the details in form BEN-2 required to be mentioned in Excel sheet, shall be uploaded in the web form.
Comparative analysis from MCA V2 and MCA V3 portal

Form BEN-2 (MCA V2) Form BEN-2 (MCA V3)
Purpose of filing the form
  • For declaration of holding reporting company
  • For declaration of SBO under Section 90
  • For a change in SBO under Section 90
 Purpose of filing the form
  • For declaration of holding reporting company
  • For declaration of SBO under Section 90
  • For a change in particulars of existing SBO under Section 90
  • For a change of existing SBO under Section 90
  • Change of the existing holding reporting company


B. MGT-6 Form Updation

Substitution of the existing Form No. MGT-6 with a new form. MCA has made an amendment in Form MGT-6 to its launch on the V-3 portal. Going forward, the following, mentioned details are also required to be considered while filing the said form:
  • Email ID of the Company
  • Number of Registered Owners for whom the form is being filed
  • Type of shares
  • Class of shares
  • Income Tax PAN/Passport Number/Other Registration Number
  • Whether BO ID is available
  • ID of Beneficial Owner
  • Income Tax PAN/Passport
Our Comments
The MCA is tightening its grip on company ownership, especially for foreign-owned businesses. In the recent quarter, they penalized several unlisted companies, including LinkedIn, for failing to identify or report their SBOs.

Previously, some companies claimed they had no SBOs because their ultimate owners were corporations or investment funds. However, the new orders suggests that the person controlling such entities (like a CEO) should be considered the SBO.

These changes promote transparency and make it harder to hide ownership for tax avoidance or other activities. It aligns with India's broader push for clearer corporate ownership structures and stronger regulations.

Here are the key takeaways:
  • MCA is penalizing companies that don't disclose their SBOs.
  • New orders clarify that individuals controlling companies (like CEOs) can be SBOs, even if the owner is another company.
  • This crackdown aims to improve corporate governance and fight financial crimes.
In a summary, the updated form BEN-2 has added two new purposes mentioned below:
  • For change in particulars of existing SBO under Section 90
  • Change of the existing holding reporting company
As per the new reporting requirements, the above-mentioned details are required to be disclosed in the updated form MGT-6.

The official notices can be accessed here:
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