A company’s register of members shows who holds its shares on paper. It does not always show who is really behind them. If a person controls a company through another company, a trust or a nominee, the register of members names the nominee, not the person. Section 90 of the Companies Act, 2013 closes that gap. It requires the people who ultimately own or control a company through such arrangements, called significant beneficial owners (SBOs), to declare themselves, and the company to report them to the Registrar of Companies (ROC).
The process runs on four forms. The SBO gives the company a declaration in BEN-1. The company files a return in BEN-2 with the ROC, records the SBO in a register in BEN-3, and uses BEN-4 to ask its shareholders for information. BEN-2 is one of the filings a private company has to track through the year, alongside its yearly ROC returns. If you would rather hand over the company’s yearly ROC work, our private limited company compliance plan covers its mandatory ROC compliances.
Who is a significant beneficial owner
An SBO is always an individual. The test looks through companies, trusts and partnerships to find the real person. In outline, an individual is an SBO if, acting alone or together with others, they:
- hold at least 10% of the company’s shares, voting rights or right to dividends, where at least part of that holding is indirect (through another entity); or
- have the right to exercise significant influence or control over the company in a way other than through direct shareholding alone.
The word “indirect” matters. If you hold 40% of a company’s shares directly in your own name and nothing else, you appear in the register of members already. You are not an SBO for that holding, and no BEN-1 is needed. SBO reporting is aimed at holdings through layers.
Examples of when the question arises
- A company’s shareholder is another company, and an individual owns most of that parent company.
- Shares are held by a trust, and an individual is the trustee or beneficiary in a way that gives them control.
- A nominee holds shares on behalf of the real owner.
- A foreign holding company owns the Indian company, and individuals abroad own the holding company.
A company owned entirely by individuals who hold their shares directly, with no shareholder that is itself an entity, will usually have no SBO to report. It should still check, and record why, each year.
The four forms and their timing
| Form | Who | What it is | When |
|---|---|---|---|
| BEN-1 | The significant beneficial owner | Declaration to the company of the beneficial interest | Within 90 days of becoming an SBO, and within 30 days of any change in the interest |
| BEN-2 | The company | Return to the ROC reporting the declaration | Within 30 days of receiving BEN-1 |
| BEN-3 | The company | Register of significant beneficial owners | Kept up to date; open to members for inspection |
| BEN-4 | The company | Notice to a member asking for SBO information | When the company needs to identify an SBO |
BEN-1 is not filed with the ROC. It is given to the company, which keeps it. BEN-2 is the ROC filing, made on the MCA portal with a director’s digital signature.
The company’s duty to find out
A company cannot wait for declarations to arrive. The rules require it to take steps to identify its SBOs. In practice that means looking at every shareholder that is not an individual, such as a company, LLP, trust or fund, holding 10% or more, and sending it a notice in BEN-4 asking who stands behind the holding.
If a member does not reply, or the answer is unsatisfactory, the company can apply to the National Company Law Tribunal. The Tribunal can restrict the shares, for example by suspending voting rights or dividend, until the information is given.
Exempt holdings
Certain holdings are excluded from SBO reporting. Examples include holdings of the Investor Education and Protection Fund Authority, a holding company that itself reports, and the Central or State Government. The exemptions are narrow, so check the current rules before relying on one.
What goes wrong most often
- Assuming direct shareholders are SBOs. They are not, for their direct holding alone. Filing BEN-2 for them adds noise and does not replace the register of members.
- Missing a change. A share transfer in the parent company can create or end an SBO interest in the subsidiary. BEN-1 is due within 30 days of the change, and BEN-2 follows.
- Not sending BEN-4. Without a notice on file, the company has no record that it tried to identify its SBOs.
- Keeping BEN-1 but not filing BEN-2. The declaration only meets the individual’s duty. The company’s duty is the filing.
Both the individual who fails to declare and the company that fails to file can face penalties under section 90. The amounts depend on the default and how long it continues.
Frequently asked questions
Does every private company have to file BEN-2 every year?
No. BEN-2 is filed when the company receives a BEN-1 declaration, not on a yearly cycle. A company with no SBO files nothing, though it should keep its BEN-4 notices and review the position each year.
Can a company be its own SBO?
No. An SBO is always an individual. Where a shareholder is a company, the question is which individuals stand behind that company.
Is BEN-2 linked to the register of members?
They are separate. The register of members records legal owners. The BEN-3 register records significant beneficial owners. A company keeps both.
Complianto (complianto.in), operated by Mentorcorp Private Limited, is a private consultancy and is not affiliated with any government body. We do not issue official documents. We charge a professional fee for application assistance and advisory services. Applicants can apply directly to the government without our fees via the official portals: MCA (mca.gov.in), Income Tax (incometax.gov.in), GST (gst.gov.in), MSME (udyamregistration.gov.in), FSSAI (foscos.fssai.gov.in), Startup India (startupindia.gov.in), and IP India (ipindia.gov.in).
This article is general information, not legal or tax advice.
