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Declaration in respect of beneficial interest in any share

Declaration in respect of beneficial interest in any share

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.

Meaning of Beneficial Interest –

Beneficial Interest is the right to receive benefits on assets held by another party. Beneficial interest is often referred to in matters concerning trusts. For example, most beneficial interest arrangements are in the form of trusts, whereby one has a vested interest in the trust’s assets.

Declaration of beneficial interest by Registered Owner –

Where the name of a person is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares (hereinafter referred to as “the registered owner”), such person shall file with the company, a declaration to that effect in Form No.MGT.4 in duplicate, within a period of thirty days from the date on which his name is entered in the register of members of such company.

Where any change occurs in the beneficial interest in such shares, the registered owner shall, within a period of thirty days from the date of such change, make a declaration of such change to the company in Form No.MGT.4 in duplicate.

Declaration of beneficial interest by Beneficial Owner –

Every person holding and exempted from furnishing declaration or acquiring a beneficial interest in shares of a company not registered in his name (hereinafter referred to as “the beneficial owner”) shall file with the company, a declaration disclosing such interest in Form No. MGT.5 in duplicate, within thirty days after acquiring such beneficial interest in the shares of the company.

Where any change occurs in the beneficial interest in such shares, the beneficial owner shall, within a period of thirty days from the date of such change, make a declaration of such change to the company in Form No.MGT.5 in duplicate.

Other Important Aspects of Section 89 –

  1. Where any declaration under this section is received by the company, the company shall make a note of such declaration in the register of members and shall file, within a period of thirty days from the date of receipt of declaration by it, a return in Form No.MGT.6 with the Registrar in respect of such declaration with fee.
  2. Nothing contained in Rule 9 of the Companies (Management and Administration) Rules, 2014 shall apply in relation to a trust which is created, to set up a Mutual Fund or Venture Capital Fund or such other fund as may be approved by the Securities and Exchange Board of India.
  3. The Central Government may make rules to provide for the manner of holding and disclosing beneficial interest and beneficial ownership under this section.
  4. No right in relation to any share in respect of which a declaration is required to be made under section 89 but not made by the beneficial owner, shall be enforceable by him or by any person claiming through him.
  5. Nothing in this section shall be deemed to prejudice the obligation of a company to pay dividend to its members under this Act and the said obligation shall, on such payment, stand discharged.

Penalty for Non-Compliance –

Penalty for Registered Owner and Beneficial Owner –

If any person fails, to make a declaration as required under Section 89(1), 89(2) & 89(3), without any reasonable cause, he shall be punishable –

(a) with fine which may extend to fifty thousand rupees and

(b) where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues.

Penalty for company –

If a company, required to file a return with the Registrar, fails to do so before the expiry of the time specified under the first proviso to sub-section (1) of section 403, the company and every officer of the company who is in default shall be punishable –

(a) with fine which shall not be less than five hundred rupees but which may extend to one thousand rupees and

(b) where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues.

Declaration in respect of beneficial interest in any share

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