𝐒𝐢𝐦𝐩𝐥𝐢𝐟𝐲𝐢𝐧𝐠 𝐒𝐢𝐠𝐧𝐢𝐟𝐢𝐜𝐚𝐧𝐭 𝐁𝐞𝐧𝐞𝐟𝐢𝐜𝐢𝐚𝐥 𝐎𝐰𝐧𝐞𝐫𝐬𝐡𝐢𝐩 (𝐒𝐁𝐎): 𝐖𝐡𝐲 𝐈𝐭 𝐌𝐚𝐭𝐭𝐞𝐫𝐬 𝐟𝐨𝐫 𝐘𝐨𝐮𝐫 𝐏𝐫𝐢𝐯𝐚𝐭𝐞 𝐂𝐨𝐦𝐩𝐚𝐧𝐲? 𝐒𝐢𝐠𝐧𝐢𝐟𝐢𝐜𝐚𝐧𝐭 𝐁𝐞𝐧𝐞𝐟𝐢𝐜𝐢𝐚𝐥 𝐎𝐰𝐧𝐞𝐫𝐬𝐡𝐢𝐩 (𝐒𝐁𝐎) is a crucial concept that private companies need to address under the Companies Act, 2013. SBO regulations aim to provide clarity on who truly controls or benefits from a company’s operations, even if these individuals aren't visible in the official records. 𝐖𝐡𝐚𝐭 𝐈𝐬 𝐒𝐁𝐎? SBO refers to individuals who, although not directly listed in a company's ownership records, still have significant control or benefit from the company. These individuals may: 1. Own at least 10% of shares (directly or indirectly). 2. Exercise significant influence or control over the company, even without holding direct ownership. The SBO framework ensures that hidden or undisclosed interests are identified, helping prevent issues like illicit financial practices, tax evasion and corporate fraud. 𝐓𝐡𝐞 𝐎𝐛𝐣𝐞𝐜𝐭𝐢𝐯𝐞 𝐚𝐧𝐝 𝐒𝐮𝐛𝐣𝐞𝐜𝐭𝐢𝐯𝐞 𝐓𝐞𝐬𝐭𝐬 𝐟𝐨𝐫 𝐈𝐝𝐞𝐧𝐭𝐢𝐟𝐲𝐢𝐧𝐠 𝐒𝐁𝐎𝐬 Under the Companies Act, 2013 and the SBO Rules, 2018, the process for identifying SBOs is governed by two tests: - 𝘖𝘣𝘫𝘦𝘤𝘵𝘪𝘷𝘦 𝘛𝘦𝘴𝘵: This test focuses on ownership and voting rights. If an individual, directly or indirectly, holds at least 10% of shares or controls 10% of the voting or dividend rights, they qualify as an SBO. - 𝘚𝘶𝘣𝘫𝘦𝘤𝘵𝘪𝘷𝘦 𝘛𝘦𝘴𝘵: This test examines influence and control. An individual may qualify as an SBO if they can exercise significant influence or control over the company’s decisions and policies, even if they don't have direct ownership. This could include decision-making power or controlling actions that affect the company’s direction. 𝐊𝐞𝐲 𝐒𝐭𝐞𝐩𝐬 𝐟𝐨𝐫 𝐒𝐁𝐎 𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞: 1. 𝘐𝘥𝘦𝘯𝘵𝘪𝘧𝘺 𝘚𝘉𝘖𝘴: It’s not just about identifying shareholders—companies must look at individuals who truly control or benefit from the business. 2. 𝘍𝘪𝘭𝘦 𝘋𝘦𝘤𝘭𝘢𝘳𝘢𝘵𝘪𝘰𝘯𝘴: SBOs must file their details in Form BEN-1 within 30 days of acquiring significant ownership or making any changes to their stake. 3. 𝘔𝘢𝘪𝘯𝘵𝘢𝘪𝘯 𝘙𝘦𝘤𝘰𝘳𝘥𝘴: Companies must maintain a BEN-3 register and submit the SBO declarations through Form BEN-2 to the Registrar. 𝐂𝐨𝐧𝐬𝐞𝐪𝐮𝐞𝐧𝐜𝐞𝐬 𝐨𝐟 𝐍𝐨𝐧-𝐂𝐨𝐦𝐩𝐥𝐢𝐚𝐧𝐜𝐞 Non-compliance with SBO regulations can result in hefty penalties: 1. Up to ₹2 lakh for individuals. 2. Up to ₹5 lakh for companies. 3. Ongoing penalties for continuing violations. At Hatch Legal, we specialize in simplifying SBO compliance for private companies. Let us help you navigate these requirements so that your company can focus on growth and profitability. #PrivateCompanies #SBO #CorporateGovernance #LawFirm #Compliance #BusinessGrowth #CorporateLaw #Finance #CorporateAdvisory #Advisory #Hatch_Legal
