FAQ on Beneficial Interest and Ownership under Companies Act, 2013
1.What is Beneficial Interest?
When it comes to owning shares, there are two main types of people:
- Legal Owners: These are the official owners, known as registered shareholders.
- Beneficial Owners: These people aren't the official owners, but they still have rights to these shares.
An Example: Picture a company where the company itself is the official owner, and there's someone else, a nominee, listed as the owner.
2.Why Does Beneficial Interest Matter?
Companies use this concept for a couple of reasons:
- To ensure they have enough members according to the rules.
- To make it simpler to set up fully-owned subsidiary companies.
3.What Does the Companies Act Say?
According to the Companies Act (Sections 89 and 90), beneficial interest means having the right to:
(i) Use the rights that come with the shares.
(ii) Receive dividends or other payments related to those shares.
4. How to Follow the Rules in Section 89?
For the Regular Owner:
- Fill out a form (MGT-4) within 30 days of being listed in the company's records.
- If anything changes, let them know within 30 days.
For the Other Owner (Beneficial Owner):
- Fill out a different form (MGT-5) within 30 days of getting this special interest.
- If anything changes, notify them within 30 days.
For the Company:
- When they receive these forms, they document them.
- They also complete another form (MGT-6) within 30 days, and there might be a fee.
5. What if You Don't Follow the Rules?
Not following the rules may result in fines:
- For Owners: A fine of ₹50,000, and if the rules continue to be ignored, there's a daily fine of ₹200, up to ₹5,00,000.
- For the Company: A daily fine of ₹1,000 (up to ₹5,00,000), and those in charge might have to pay ₹2,00,000.
6. Declarations and the Benami Act?
- Submitting a declaration helps the government monitor things that seem suspicious.
- Just submitting the declaration doesn't make you immune from the law.
- Authorities can investigate further based on what's in the declaration.
7. Legal Matters: Making Sense of It All?
-One court case highlighted the importance of everyone's intentions in determining if something goes against the law.
-Another case emphasized that if you want everyone to recognize your ownership, you need to inform them by filing the right papers.
-The Companies Act and the Benami Act should be read together in a way that makes sense.
In simpler terms, understanding and following these rules about beneficial interest and ownership in Section 89 helps keep things clear and fair in the business world.
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