Applicability of the Companies (SBO) Amendment Rules, 2019 – Part 1
Applicability of the Companies (SBO) Amendment Rules, 2019 – Part 1
This is the first of a two part write-up on the Applicability of the Companies (SBO) Amendment Rules, 2019
1. INTRODUCTION AND BACKGROUND
With the recommendations of the Financial Action Task Force (working to prevent money laundering, terrorist financing and other related threats), the Government of India has introduced Significant Beneficial Owners (SBO) concept through Section 90 of the Companies Act, 2013. Accordingly Ministry of Corporate Affairs (MCA) has by Notification dated 8th February, 2019 introduced the Companies (Significant Beneficial Owners) Amendment Rules, 2019.
2. KEY DEFINITIONS
| Control | It shall include the right to appoint majority of the directors or to control the management or policy decisions, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner. |
| Majority Stake | Holds more than one-half of the equity share capital / voting rights / right to receive or participate in distributable dividend or any other distribution. |
| Reporting Company | Means a Company incorporated under the Companies Act and required to comply with SBO guidelines |
| Shares | It includes Global Depository Receipts (GDRs), Compulsorily Convertible Preference Shares (CCPS) and Compulsorily Convertible Debentures (CCDs) issued by the Company, on a fully diluted basis |
| Significant Influence | Means the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company but does not include control or joint control of those policies. |
3. IDENTIFICATION OF SBO
End of the first of a two part write-up on the Applicability of the Companies (SBO) Amendment Rules, 2019