Corporate transparency and accountability have become one of the major focuses under the Companies Act, 2013. To achieve this opportunity, the Ministry of Corporate Affairs (MCA) has introduced several reporting requirements that require companies to disclose important information about their ownership and control structure. One of the most important compliance obligations is related to the Significant Beneficial Ownership (SBO) and the filing of Form BEN-2.
This article will provide a detailed understanding of Form BEN-2, which will include its applicability, due dates, filing requirements, and penalties.
What is Form BEN-2?
Form BEN-2 is an electronic return which is filed with the Registrar of Companies (ROC) under the Companies (Significant Beneficial Owners) Rules, 2018, read with Section 90 of the Companies Act, 2013.
It serves as a declaration by companies regarding individuals who are identified as Significant Beneficial Owners (SBOs) in the company. In simple words, it is the reporting form through which companies can easily disclose to the MCA who the real owners behind their shares are, even if ownership is held indirectly through various layers of entities.
Understanding Significant Beneficial Ownership (SBO)
Before diving into the applicability of Form BEN-2, it is important to understand who qualifies as an SBO.
An SBO is an individual who:
- Directly or indirectly holds 25% or more of the shares, voting rights, or right to receive dividends in a company, or
- Exercises significant influence or control over the company, directly or indirectly.
This threshold has since been revised, and under current rules, an individual is considered an SBO if he or she holds 10% or more of shares, voting rights, or distributable dividend rights, or has the right to exercise significant influence/control in the company.
Applicability of Form BEN-2
Form BEN-2 is applicable to all companies incorporated in India, whether private or public, except:
- Government companies,
- Wholly owned subsidiaries of Indian companies (with certain exemptions), and
- Companies/body corporates regulated by financial sector regulators such as SEBI, RBI, IRDAI, or PFRDA, in some cases.
Key Points on Applicability:
- Every company must identify individuals who are SBOs in relation to it.
- Once identified, the company must ensure that these SBOs file Form BEN-1 with the company.
- On receipt of BEN-1 from the SBO, the company has to file a return in Form BEN-2 with the Registrar of Companies.
Due Date for Filing Form BEN-2
The timeline for filing Form BEN-2 is strict, and companies must adhere to it carefully.
- Initial Filing: Companies were required to file the Form BEN-2 within 30 days from the date of receipt of the declaration in Form BEN-1. The MCA had extended the previous timeline initially without levying additional fees to provide relief to companies during the transition.
- Ongoing Filing Requirement: Every time a company receives a declaration in the Form BEN-1 from a Significant Beneficial Owner, the company must file Form BEN-2 within 30 days of such receipt.
Step-by-Step Filing Process of Form BEN-2
1. Identification of SBOs
The company must take necessary steps to identify individuals who are SBOs as per the criteria defined under the Companies Act and SBO Rules.
2. Collection of Declaration (Form BEN-1)
The SBO is required to provide a declaration to the company in Form BEN-1, disclosing their beneficial ownership.
3. Filing of Form BEN-2
Once the declaration is received, the company must file Form BEN-2 with the ROC within 30 days. The form requires details such as:
- Name, address, and personal details of the SBO
- Date of acquisition of beneficial interest
- Nature of the beneficial interest (shares, voting rights, dividend rights, etc.)
- Percentage of holding or control
- Any changes in the SBO’s details
4. Payment of Fees
The company must pay prescribed filing fees depending on its nominal share capital, as per the Companies (Registration Offices and Fees) Rules.
Fees for Filing Form BEN-2
The filing fee depends on the company’s nominal share capital:
- For companies with share capital:
- Up to ₹1,00,000: ₹200
- ₹1,00,000 to ₹4,99,999: ₹300
- ₹5,00,000 to ₹24,99,999: ₹400
- ₹25,00,000 to ₹99,99,999: ₹500
- ₹1 crore or more: ₹600
- For companies without share capital: ₹200 per document.
Late filing attracts additional fees ranging from 2x to 12x of the normal filing fee, depending on the period of delay.
Consequences of Non-filing
Non-compliance with SBO rules and failure to file Form BEN-2 attract stringent penalties.
For Companies:
- Fine of at least ₹10 lakhs, which may extend up to ₹50 lakhs.
- Further fine of ₹1,000 per day for continuing default.
For Officers in Default:
- Fine ranging from ₹25,000 to ₹1,00,000.
For SBOs:
- SBOs who fail to make declarations in Form BEN-1 can face penalties of ₹1,00,000 to ₹10,00,000, along with ₹1,000 per day for continuing default.
Practical Challenges in Filing Form BEN-2
- Tracing ultimate ownership through multiple layers of entities, especially if spread across different jurisdictions.
- Lack of cooperation or delay from SBOs in providing their BEN-1 declaration.
- Determining “significant influence” in complex group structures.
- Risk of penalties for delays, even when the fault lies with the SBO not providing timely information.
Importance of Form BEN-2
The introduction of Form BEN-2 is a major step towards enhancing corporate governance and transparency in India. It prevents the various misuse of complex corporate structures for unlawful or illegal purposes such as money laundering, tax evasion.
Key benefits include:
- Identifying the “real” individuals behind companies.
- Ensuring accountability in corporate decision-making.
- Preventing fraudulent practices through shell companies.
- It aligns with Indian corporate regulations and global standards on beneficial ownership disclosures.
Best Practices for Compliance
- Early Identification – Regularly review shareholding structures to identify SBOs.
- Maintain Communication – Engage SBOs and remind them of their duty to submit Form BEN-1 on time.
- Timely Filing – File Form BEN-2 promptly within 30 days of receiving BEN-1 to avoid penalties.
- Maintain Records – Keep proper records and data of all BEN-1 declarations and BEN-2 filings for audit and regulatory purposes.
- Professional Assistance – Always consult with company secretaries or legal professionals for the complex ownership structures.
Conclusion
Form BEN-2 plays a crucial role in disclosing the important Beneficial Ownership and also ensuring that the real individuals behind companies are brought to light. Its applicability spans all Indian companies, and strict due dates of 30 days from the receipt of BEN-1 make timely compliance critical.
Failure to comply attracts heavy penalties for companies and SBOs alike. While the compliance process may pose practical challenges, adopting strong governance practices, proactive communication with the SBOs, and timely filing can help companies stay compliant.
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