Sections 89 and 90 of Companies Act 2013: Beneficial Interest and Significant Beneficial Ownership
Sections 89 and 90 of the Companies Act, 2013 create related but distinct disclosure regimes. Section 89 deals with cases where the registered holder of a share and the person holding the beneficial interest are different. Section 90 focuses on identifying and disclosing individuals who are significant beneficial owners of a company.
Section 89 - Declaration in respect of beneficial interest in any share
Section 89 addresses a mismatch between the name entered in the company's register of members and the person who actually holds the beneficial interest in the share. A registered holder who does not hold the beneficial interest must declare the person who does. The beneficial owner must also declare the nature of the beneficial interest and particulars of the registered holder.
If there is a change in the beneficial interest, the registered holder and beneficial owner are required to make the prescribed declaration within 30 days of the change. Once a company receives a declaration, it must note the declaration in the relevant register and file the prescribed return with the Registrar within 30 days.
Meaning of beneficial interest
For Sections 89 and 90, "beneficial interest" in a share includes, directly or indirectly and through any contract, arrangement or otherwise, a person's right or entitlement, alone or together with another person, to exercise rights attached to the share or to receive or participate in dividends or other distributions in respect of that share.
Effect of non-declaration
Where a declaration required under Section 89 is not made by the beneficial owner, rights relating to the relevant share are not enforceable by that beneficial owner or by a person claiming through the beneficial owner. The company's statutory obligation to pay dividend to its member is not prejudiced by Section 89.
Section 89 forms and filing timeline
| Compliance | Form | General timeline |
|---|---|---|
| Declaration by registered owner who does not hold beneficial interest | MGT-4 | As prescribed under the Companies (Management and Administration) Rules, 2014 |
| Declaration by beneficial owner | MGT-5 | As prescribed under the Companies (Management and Administration) Rules, 2014 |
| Return by company to Registrar after receipt of declaration | MGT-6 | Within 30 days of receipt of the declaration, subject to the Act and Rules |
The prescribed forms, filing mode and MCA portal requirements may change. Before filing, verify the current form version and instructions on the MCA portal.
Section 90 - Register of significant beneficial owners in a company
Section 90 requires disclosure of significant beneficial ownership and places an active identification duty on the company. An individual who meets the applicable statutory and prescribed criteria must make a declaration to the company. The company must maintain the prescribed register, file the prescribed return with the Registrar and take necessary steps to identify individuals who are significant beneficial owners.
Who is a significant beneficial owner?
The Companies (Significant Beneficial Owners) Rules, 2018 must be read with Section 90. In broad terms, the regime looks through indirect ownership and control structures to identify the relevant individual. The prescribed tests include indirect holding or entitlement at the specified threshold and the right to exercise, or actual exercise of, significant influence or control other than solely through direct holdings.
The legal analysis can differ where the member is a body corporate, Hindu undivided family, partnership entity, trust, pooled investment vehicle or an entity based in a jurisdiction covered by the Rules. The Rules contain specific look-through tests and exemptions.
Key SBO compliance under Section 90 and the SBO Rules
| Requirement | Form / action | Purpose |
|---|---|---|
| Declaration by significant beneficial owner | BEN-1 | Disclosure by the individual to the reporting company |
| Return by reporting company to Registrar | BEN-2 | ROC filing of significant beneficial ownership particulars and changes |
| Register of significant beneficial owners | BEN-3 | Company's statutory SBO register |
| Notice seeking information | BEN-4 | Notice to a person whom the company knows or has reasonable cause to believe falls within Section 90(5) |
A company may issue the prescribed notice to a person whom it knows or has reasonable cause to believe is an SBO, knows the identity of an SBO or another person likely to have that knowledge, or has been an SBO during the preceding three years but is not registered as required. The person receiving the notice must provide the required information within the statutory period, which cannot exceed 30 days.
If the information is not supplied within the specified time or is unsatisfactory, the company is required to apply to the Tribunal within the statutory period for restrictions on the shares concerned. The Tribunal may, after giving the parties an opportunity of being heard, impose restrictions on rights attached to those shares.
Penalties and consequences
Section 89
A person who fails to make a declaration required by Section 89(1), (2) or (3) is liable to a penalty of Rs. 50,000 and, for a continuing failure, a further penalty of Rs. 200 for each day after the first, subject to a maximum of Rs. 5 lakh. If the company fails to file the return required by Section 89(6), the company and every officer in default are subject to the statutory daily penalties and maximum limits specified in Section 89(7).
Section 90
Failure by an individual to make the declaration required by Section 90(1) attracts the penalty specified in Section 90(10). A company that fails to maintain the register, file the required information, take the necessary identification steps, or permits a default covered by Section 90(11) is subject to the penalties prescribed for the company and officers in default.
Under Section 90(12), a person who wilfully furnishes false or incorrect information or suppresses material information in a declaration is liable to action under Section 447, which deals with fraud. Because Section 447 has serious consequences, declarations should be based on a careful review of the ownership and control chain.
Section 89 and Section 90 - practical distinction
| Section 89 | Section 90 |
|---|---|
| Focuses on beneficial interest where registered ownership and beneficial ownership differ. | Focuses on identifying individuals who qualify as significant beneficial owners. |
| Declarations are principally made through the Section 89 / Management and Administration Rules framework. | Compliance is governed by Section 90 read with the Companies (Significant Beneficial Owners) Rules, 2018. |
| Common forms include MGT-4, MGT-5 and MGT-6. | Common forms include BEN-1, BEN-2, BEN-3 and BEN-4. |
Official legal resources
For the latest statutory text, rules, notifications, e-forms and filing instructions, use the official sources below. MCA filing requirements and electronic form versions should be checked immediately before compliance.
India Code - Companies Act, 2013
Ministry of Corporate Affairs - official portal