Beneficial Interest in Shares
If you go for the dictionary meaning then as per the Cambridge Business English Dictionary, beneficiary Interest means the right to receive income, profits, interest etc. from a business, contract, or investment.
As per Section 89
sub-section (10) of the Companies Act 2013, 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 share.
Registered Owner
He is the Person or entity whose name is entered as shareholder in the Register
of Member.
Beneficial Owner
He is the Person or entity whose name is not entered as shareholder in the
Register of Member but derived or receives all the benefits arising from the
shares like dividend, voting rights etc.
Let’s take a practical
example, Mr X. opens a Demat account with “CDSL” (Central Depository Service
(India) Ltd) who is a Depository though the Depository Participant (DP), Mr.
Broker. Now as securities are held in dematerialised form. When there is a
purchase of shares, the shares are registered in the name of “CDSL” in the
register of issuing company and not in the name of Mr. X.
Here, the registered owner
is “CDSL” but the beneficiary owner will be Mr. X.
Compliance under Companies
Act
As per Section 89 of the Companies
Act 2013 as amended for time to time, there is compliance to be accomplish in
case of "Beneficiary Interest in shares" by Registered Owner,
Beneficiary Owner and Company. To ensure clarity, we will discuss them one by
one.
Compliance in Case of Registered Owner
- The registered owner has to give a “Declaration” to the Company with details of Beneficiary owner in the manner prescribed.
- Form – Declaration is to be given in Form No. MGT. 4.
- Time – 30 days from the date of entering name in the register of members of such company.
- Further change in the beneficiary interest – then again the registered owner has to give a “Declaration” to the Company with details of Beneficiary owner in Form No. MGT.4 within 30 days from the date of change.
Compliance in Case of Beneficiary Owner
- The beneficiary owner has to give a “Declaration” to the company specifying his interest, details of registered owner and others prescribed.
- Form – Declaration is to be given in Form No. MGT. 5.
- Time – 30 days from the date of acquiring such beneficiary interest.
- Further change in the beneficiary interest – then again the beneficiary owner has to give a “Declaration” to the Company with details of change in Form No. MGT.5 within 30 days from the date of change.
Company
- Once the declaration is received by the company from the registered owner or beneficiary owner. The company has to file a Return with ROC (Registrar of Companies) with fee.
- Noting in Register of Member - The Company make a note in the register of members.
- Return – Return is to be made in Form No. MGT. 6.
- Time - 30 days from the date of receipt of declaration.
- Days counting – 30 days will be counted from the date of receipt of declaration of Registered Owner and Beneficiary Owner, whichever is later.
Non-Applicability
These provisions are not applicable on Trust formed as Mutual Funds or Venture Capital Fund or such other fund as may be approved by SEBI (Security and Exchange Board of India).
Non Compliance
The Non Compliance of Section 89 of the Act will attract fine :-
In Case of Beneficiary Owner
or Registered Owner
- In case of non-compliance by beneficiary owner or registered owner without any reasonable cause. They will be fined upto ₹ 50,000 (Rupees Fifty Thousand).
- In addition to above if the failure is continuing one. The further fine may be charged of ₹ 1000 (Rupees One Thousand) for every day of continuing default after first failure.
In Case of Company
- In case of non-compliance by the Company. The company and every officer in default shall be punishable with a fine.
- Fine shall not be less than ₹ 500 (Rupees Five Hundred), which may be extended to ₹ 1000 (Rupees One Thousand).
- In addition to above if the failure is continuing one. The further fine may be charged of ₹ 1000 (Rupees One Thousand) for every day of continuing default after first failure.
I hope this blog will be helpful to all the readers. This is all about beneficiary interest as per Companies Act. Please due share with your friends and family. For any comments and queries please go to the comment box below.
Disclaimer :
The above blog is purely
for educational and guidance purpose. It's just the reflection of the
author's personal experience and judgment. The author has just provided the
general information & understanding and its not at all an alternative of
any legal advice or practitioner. It has no connection with the websites
mentioned in its contents. The content stated in the blog should be used by the
reader at his own discretion and sole responsibility. The content of the blog
can be only used for any other document, write-up, article, blog and any
written or printed material whether on paper or digitally in any form, with the
prior permission of the author.
