BEN-2 and significant beneficial owners: the 10% test, the forms and the penalties
When a company’s shares are held through another company, an LLP or a trust, the law wants the individual at the end of the chain named. That is what the SBO rules and Form BEN-2 do.
Reviewed by Vijay Dhawan, Managing Partner, LexVerge LLP, on · Published
Quick answer
A significant beneficial owner (SBO) is an individual who holds at least 10% of a company’s shares, voting rights or dividend rights indirectly, or who exercises significant influence or control other than through direct holdings alone. The SBO declares this to the company, and the company files Form BEN-2 within 30 days of receiving the declaration. Default costs the SBO up to ₹2 lakh, the company up to ₹5 lakh and each officer up to ₹1 lakh.
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Who is a significant beneficial owner
Under section 90 and the Companies (Significant Beneficial Owners) Rules, 2018, an individual is an SBO of a company if, acting alone or together, or through other persons or a trust, he or she:
- holds indirectly, or together with any direct holdings, not less than 10% of the shares; or
- holds indirectly, or together with any direct holdings, not less than 10% of the voting rights; or
- has a right to not less than 10% of the distributable dividend in a year, through indirect holdings alone or together with direct holdings; or
- has the right to exercise, or actually exercises, significant influence or control other than through direct holdings alone.
The word that matters is indirectly. A founder who holds 60% in her own name, and nothing through anyone else, is already on the register of members and is not an SBO. The rules bite when the shareholder is a company, an LLP, a partnership, a trust or an HUF, and an individual sits behind it.
A simple example
Alpha Private Limited is 100% owned by Beta Holdings Private Limited. Mr Rao owns 70% of Beta. Mr Rao holds no shares in Alpha directly, but through Beta he holds a majority stake in Alpha’s shareholder. He is an SBO of Alpha, and Alpha must report him in BEN-2.
Foreign parents are the common case: an Indian subsidiary has to trace its ownership up the chain until it reaches individuals.
The forms and the timeline
| Form | Who | What and when |
|---|---|---|
| BEN-1 | The SBO, to the company | Declaration of significant beneficial ownership, within 30 days of becoming an SBO or of any change |
| BEN-2 | The company, to the Registrar | Return of the declaration, within 30 days of receiving BEN-1 |
| BEN-3 | The company | Register of significant beneficial owners |
| BEN-4 | The company, to its members | Notice seeking information where it believes there is an SBO who has not declared |
The duty does not wait for the SBO to come forward. Under section 90(4A) the company must take the necessary steps to find out whether it has an SBO, and to make that person declare.
Late fee for BEN-2
| Delay | Additional fee |
|---|---|
| Up to 30 days | 2 times the normal filing fee |
| More than 30 and up to 60 days | 4 times |
| More than 60 and up to 90 days | 6 times |
| More than 90 and up to 180 days | 10 times |
| More than 180 days | 12 times |
The normal fee is ₹200 to ₹600 depending on the company’s share capital. The 30 days run from the date the declaration is received; with several SBOs, from the earliest.
Penalties
| Who | Default | Penalty | Maximum |
|---|---|---|---|
| The SBO | Not making the declaration | ₹50,000, plus ₹1,000 a day | ₹2 lakh |
| The company | Not maintaining the register, not filing BEN-2, or not taking steps to identify the SBO | ₹1 lakh, plus ₹500 a day | ₹5 lakh |
| Every officer in default | The same defaults | ₹25,000, plus ₹200 a day | ₹1 lakh |
Registrars do adjudicate these. In one published order, a company that had not identified its SBO for 1,049 days was penalised the full ₹5 lakh, each director ₹1 lakh, and the individual at the top of the chain ₹2 lakh.
What to do now
- List every shareholder that is not an individual.
- For each, find out who owns or controls it, up to individuals.
- Work out each individual’s indirect share in your company.
- Where anyone reaches 10%, or has control, obtain BEN-1 and file BEN-2.
- Repeat whenever the shareholding above you changes.
We file BEN-2 through our ROC filing service.
Frequently asked questions
What is the due date for BEN-2?
Within 30 days of the company receiving the declaration from the significant beneficial owner. With more than one SBO, the earliest date of receipt counts.
Who is a significant beneficial owner?
An individual who, alone or together or through other persons or a trust, holds indirectly or with direct holdings at least 10% of the shares, voting rights or distributable dividend of a company, or exercises significant influence or control other than through direct holdings alone.
Is a shareholder who holds shares only in his own name an SBO?
No. The test looks at indirect holdings, or indirect holdings together with direct ones. A person holding only directly is already on the register of members.
What is the penalty for not filing BEN-2?
₹1 lakh plus ₹500 a day up to ₹5 lakh for the company, and ₹25,000 plus ₹200 a day up to ₹1 lakh for every officer in default, under section 90(11).
What is the penalty on the significant beneficial owner?
₹50,000 plus ₹1,000 for each day the failure continues, up to ₹2 lakh, under section 90(10).
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Official references
The statutory sources behind this page. We keep our guidance aligned to them: verify anything time-sensitive directly.
- Ministry of Corporate AffairsCompanies Act filings, forms and fee schedules
- Income Tax DepartmentReturns, forms, rates and e-filing utilities
- GST PortalRegistration, returns and rate notifications
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