Beneficial Interest in Securities

INTRODUCTION

The concept of declaration of beneficial interest in any share has been discussed under Section 89 of the Companies Act, 2013[1] in chapter 7th. Beneficiary interest is generally the profit that has been created as a result from a contact for the ownership of any state from the distinct legal ownership or control.[2] A beneficial interest is also “distinguished from the rights of someone like a trustee or official who has responsibility to perform and/or title to the assets but does not share in the benefits”.[3]

Beneficiary interest in the shares means the situation where the shares are on the name of one person but it originally relates to some other person. In this case the declaration should be given to the company and the person whose interest involved has to give declaration too.[4]

Rule 9 of the Companies (Management and Administration) Rules 2014 supplements provisions of Section 89 of the Act. “A person whose name 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”), shall file with the company, a declaration to that effect in Form 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 the company”.[5]

Whenever the charge will occur in the beneficial interest in such shares then the registered owner have to make changes within the period of 30 days. The person who is holding and is exempted from furnishing declaration for acquiring beneficial interest investors of the company will not register please name and shell file with the company with an interest. Whenever there will be any declaration which will be received under section 89 by the company that the company after make a note of search declaration in the register of members within 30 days from the date of receipt of declaration received.[6]

PURPOSE FOR HAVING BENEFICIAL INTEREST

The purpose for having the declaration of beneficial interest in any shares are as following

  1. It should satisfy the requirement of minimum number of members.
  2. It Incorporate wholly owned subsidiary.[7]

RELEVANT PROVISIONS IS PRESCRIBED IN SECTION 89 OF THE COMPANIES ACT 2013

  • When the name of a person is entered into the register of members as the holder of share in that company but he does not hold any beneficial interest insert share search person has to make a declaration within search time under the form as maybe described by the company specifying the names and the particulars of the person for holding the beneficial interest in such shares.
  • The person who holds a beneficial interest has to make the declaration to the company for specifying the nature of his interest.
  • If there is any change which has been occurred in the beneficial interest of such shares then the person which has been temporary and sub-section 1 and the beneficial owner under sub-section to within the period of 30 days has to make change. Central government has the right to make the rules for providing the manner under which holding and gives disclosing a beneficial interest and ownership can be done.[8]
  • If a person does not make the declaration as required under subsection 1, sub-section 2 or sub-section 3, then he shall be punishable with the fine which may extend up to Rs. 50000 and can extend up to Rs. 1000 everyday during which the failure continuous. Where declaration under the section is my to accompany then the company has to make a note of such declaration in the register within the period of 30 days.[9]
  • If a company is required to file a return under sub-section 6 he’s to do then the company and every official of the company who is in the fault will be punishable with the fine. There has to be no right in relation to any such share in respect of in relation declaration is required to be made.[10]
  • The central government may appoint one or more competent persons to investigate and report about the beneficial ownership and the provisions under Section 216 shall apply to such investigation.

 

[1] Section 89 of the Companies Act, 2013 states that-

  1. 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, such person shall make a declaration within such time and in such form as may be prescribed to the company specifying the name and other particulars of the person who holds the beneficial interest in such shares.
  2. Every person who holds or acquires a beneficial interest in share of a company shall make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company and such other particulars as may be prescribed.
  3. Where any change occurs in the be(…………)

[2] Declaration in respect of beneficial interest in any share., Declaration in respect of beneficial interest in any share., http://www.advocatekhoj.com/library/bareacts/companies2013/89.php?Title=Companies%20Act,%202013&STitle=Declaration%20in%20respect%20of%20beneficial%20interest%20in%20any%20share (last visited Apr 17, 2017).

[3] BENEFICIAL INTEREST IN SHARES, BENEFICIAL INTEREST IN SHARES (2014), https://aishmghrana.me/2014/06/17/beneficial-interest/ (last visited Apr 17, 2017).

[4] CS D Hem Senthil Raj, Declaration of Beneficial Interest under Companies Act, 2013Declaration in respect of Beneficial Interest in any Shares (2015), http://taxguru.in/company-law/declaration-beneficial-interest-companies-act-2013.html (last visited Apr 17, 2017).

[5] Supra note 3.

[6] Section 89 of Companies Act, 2013, , https://www.lawnotes.in/Section_89_of_Companies_Act,_2013 (last visited Apr 17, 2017).

[7] Declaration in respect of beneficial interest in any share, , http://www.cakart.in/blog/beneficial-interest-in-share/ (last visited Apr 17, 2017).

[8] Navneet K. Arora & Co., Company Secretaries, An Analysis on the “Declaration of Beneficial Interest in any shares, http://www.navneetaroracs.com/wp-content/uploads/2014/04/An-Analysis-on-Law-Related-to-Beneficia-Interest.pdf (last visited Apr 17, 2017).

[9] Id.

[10] Declaration by the beneficial owner who holds or acquires beneficial interest in shares but whose name is not entered in the register of members , , https://thecompaniesact2013.com/admin/uploads/1398851236_Declaration%20by%20the%20beneficial%20owner%20who%20holds%20or%20acquires%20beneficial%20interest%20in%20shares%20but%20whose%20name%20is%20not%20entered%20in%20the%20register%20of%20members.pdf (last visited Apr 17, 2017).

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