Registered Owner vs Beneficial Owner A Curtain raiser

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The concept of beneficial ownership refers to having a beneficial interest in any property, goods including securities. Beneficial interest usually is a "profit, benefit or advantage resulting from a contract, or the ownership of an estate as distinct from the legal ownership or control.

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Registered Owner vs. Beneficial Owner– A Curtain raiser Customer Care No. 91-11-45562222 www.taxmann.com

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Background 1.0  The concept of beneficial ownership refers to having a beneficial interest in any property, goods including securities. Beneficial interest usually is a "profit, benefit or advantage resulting from a contract, or the ownership of an estate as distinct from the legal ownership or control." A beneficial interest is different from the rights of someone like a trustee or an official who has the responsibility to perform and/or title to the assets but does not share in the benefits. This article deals with the concept of beneficial owner and registered owner of shares of a company. 2 Customer Care No. 91-11-45562222 www.taxmann.com

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2.0 The meaning of the two words: Registered Owner and Beneficial Owner: ( a)Registered owner - A person whose name is registered in the Register of Members as the holder of shares in that company but who does not hold the beneficial interest in such shares is commonly called as the registered owner of the shares. ( b)Beneficial/Legal owner - a person who actually holds the beneficial interest in the shares but whose name is not registered in the Register of Members is commonly called as the beneficial owner/legal owner. Relevant provisions 3.1 Provisions of sections 89 and 187 3.1.1 Section 89: Under the Companies Act, 2013 ("Act") section 89 requires making of declaration in the event if the registered owner and the beneficial owner of shares held in company are two different persons. ♦For acquiring membership by such entities (for example: partnership firm, Hindu Undivided Family ('HUFs'), etc ) who are not allowed to hold shares directly of a company. 3 Customer Care No. 91-11-45562222 www.taxmann.com

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First proviso to section 187: 3.1.2 The first proviso to section 187 allows a holding company to hold the shares of its wholly-owned subsidiary in the name of nominees, other than in its own name for the purpose of meeting the minimum number of members as per the Act. ♦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 a public limited company ♦To incorporate or to have a wholly owned subsidiary. This article endeavors to cover the issues related with the rights of a beneficial owner and registered owner . 3.2 Details of Provisions of Section 89 and Section 187 3.2.1 Section 89 3.2.1.1 Mandatory Declarations to be made: Section 89, read with rule 9 of the Companies (Management and Administration) Rules, 2014 deals with declaration of beneficial interest in the shares held. It generally includes following three steps : 4 www.taxmann.com Customer Care No. 91-11-45562222

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♦ The person or a company (as the case may be), who holds the beneficial interest in any share shall submit the declaration in Form MGT 4 along with the covering or request letter to the company in which they hold the beneficial interest within thirty days from the date of acquisition or change in beneficial interest . ♦ The person or the company (as the case may be), whose name is to be entered into the register of members of the company shall submit the declaration in Form MGT 5 within thirty days from the date of acquisition or change in beneficial interest to the company ♦ On receipt of declaration in Forms MGT 4 & 5 by the company, the same shall be placed before the board for approval. The company shall also intimate to the Registrar of Companies ('ROC') in e-Form MGT 6 within thirty days from the date of receipt of declaration in Forms MGT 4 & 5. The basic intent behind the above section is to reveal the identity of the beneficial owner which is unknown to the company. 5 Customer Care No. 91-11-45562222 www.taxmann.com

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6 To read more, please click here Customer Care No. 91-11-45562222 www.taxmann.com

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