Declaration in respect of
Beneficial Interest in any Shares
By
CS K Vinoth & CS D Hem Senthil Raj
Overview:
Section 89 of the Companies Act, 2013 and
Chapter VII of The Companies (Management and Administration) Rules, 2014 covers
the concept of declaration of beneficial interest in any shares (Including
Preference Shares).
Purpose
for having Beneficial Interest
The concept of declaration of
Beneficial Interest in any shares can be used for any of the following purposes
by the companies:
ü To
satisfy the requirement of minimum number of members (i.e.) 2 (Two) in case of a
private limited company and 7 (Seven) in case of an unlisted public limited
company.
ü To
incorporate or to have a wholly owned subsidiary.
Procedure involved in Declaration of Beneficial
Interest:
Step -1:
The person or a company (as the case
may be), who holds the beneficial interest in any share shall submit the declaration
as prescribed by The Companies (Management and Administration) Rules, 2014 in Form MGT 5 along with the covering or
request letter to the company in which they hold the beneficial interest within
one month from the date of acquisition or change in beneficial interest.
Step-2:
The person or the company (as the case may be), whose name to be
entered into the register of members of the company shall submit the
declaration as prescribed by The Companies (Management and Administration)
Rules, 2014 in Form MGT 4 within one
month from the date of acquisition or change in beneficial interest.
Step-3:
On receipt of declaration in Form MGT
4 & 5 by the company, the same shall be placed before the board for approval.
The company are also required to intimate the Registrar of companies in e-form MGT 6 (Available in MCA Portal) within
one month from the date of receipt of declaration in Form MGT 4 & 5.
Documentation Involved:
Person or company holding Beneficial
Interest in Any Shares:
ü Covering
or request Letter intimating the change in acquisition or change in beneficial
interest.
ü Form
MGT 5.
ü Proof
of Identity of Beneficial Owner/Registered Owner
üInstrument
under which beneficial interest is created/transferred/changed.
Person or Company Name to be registered with the Register of
Members:
ü Form
MGT 4
ü Proof
of identity of Beneficial Owner/Registered Owner
Company:
ü Board
Resolution for approval of Form MGT 4 & 5.
ü Filing
of e-form MGT 6 with the ROC.
ü Updation
of Members registers.
(Note to be
written in Remarks column as acquisition of beneficial interest or transfer of
beneficial interest as the case may be)
Penal
Provisions in case of non-compliance of section 89:
In case of person:
An person fails to make a
declaration under section 89(1)(,(2) & (3) without any reasonable cause, he
shall be punishable with fine which may extend to fifty thousand rupees and
where the failure is continuing one, with a further fine of one thousand rupees
every day.
In case
of Company:
If a company fails to file
the return within the stipulated time period, the company and every officer of
the company who is in default shall be punishable with fine which shall not be
less than five hundred rupees and may extend to one thousand rupees and where
the failure is a continuing one, with a further fine of one thousand rupees
every day.
Frequently Asked Question:
Whether Section 89 and Rules are
applicable for Declaration of interest in case of a preference share?
Yes,
the Section and Rules are applicable to any kind of shares and the above said
procedure shall be followed.
Whether the procedures specified in this
Section and Rules are to be followed in case of companies having dematerialised
shares?
Yes, the
procedures are same, however the companies are required to intimate about the
request received either acquisition or transfer of beneficial interest, as the
case may to be to the Depository Participant for the purpose of updation of
register of members.
Similarly the
company shall attach the covering letter to the e-form MGT – 6 to be filed with
the ROC by specifying that the shares of the company are held in demat and the
company cannot fill the distinctive number, which is the mandatory column in
the e-form MGT - 6.
Whether the registered members are
entitled to participate and vote in general meeting?
Yes, even
they have right to appoint proxy.
Can the
employees or friends or relatives of the beneficial owner shall hold share as
registered members on behalf of the beneficial owner?
Yes.
Unanswered
Question under Companies Act, 2013:
Whether Section 185 of the CA, 2013 is
applicable in case of lending company director who holds more than 25% of
equity shares in the public limited (who got loan from lending company) as a
registered shareholder on behalf of a beneficial owner?
BY
CS
CS K VINOTH
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