Section 89 of Companies Act, 2013 – Declaration in Respect of Beneficial Interest in Any Share

SECTION 89. DECLARATION IN RESPECT OF BENEFICIAL INTEREST IN ANY SHARE

[Effective from 1st April, 2014]

EXEMPTIONS

Section 89 shall not apply to a Government Company, vide Notification No. GSR 463(E) dated 5th June, 2015.

The above mentioned exception shall be applicable to a government company which has not committed a default in filing its financial statements under section 137 of the said Act or annual return under section 92 of the said Act with the Registrar, vide amendment notification F. No. 1/2/2014- CL-V dated 13th June 2017. 

(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 beneficial interest in such shares, the person referred to in sub-section (1) and the beneficial owner specified in sub‑section (2) shall, within a period of thirty days from the date of such change, make a declaration to the company in such form and containing such particulars as may be prescribed.

(4) The Central Government may make rules to provide for the manner of holding and disclosing beneficial interest and beneficial ownership under this section.

(5) If any person fails, to make a declaration as required under sub-section (1) or sub-section (2) or sub-section (3), without any reasonable cause, he shall be punishable with fine which may extend to fifty thousand rupees and 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.

(6) Where any declaration under this section is made to a company, the company shall make a note of such declaration in the register concerned and shall file, within thirty days from the date of receipt of declaration by it, a return in the prescribed form with the Registrar in respect of such declaration with such fees or additional fees as may be prescribed [4][***].

Exemption

In case of a Specified IFSC private company for the words “thirty days” the words “sixty day” shall be read vide Notification no. G.S.R. 9(E).dated 04th January, 2017.

In case of a Specified IFSC public company for the words “thirty days” the words “sixty day” shall be read vide Notification no. G.S.R. 08(E).dated 04th January, 2017.

(7) If a company, required to file a return under sub-section (6), fails to do so before the expiry of the time specified [5] [therein], the company and every officer of the company who is in default shall be punishable with fine which shall not be less than five hundred rupees but which may extend to one thousand rupees and 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.

(8) No right in relation to any share in respect of which a declaration is required to be made under this section but not made by the beneficial owner, shall be enforceable by him or by any person claiming through him.

(9) 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.

[(10) For the purposes of this section and section 90, beneficial interest in a share includes, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to—

(i)   exercise or cause to be exercised any or all of the rights attached to such share; or

(ii)  receive or participate in any dividend or other distribution in respect of such share.][6]

Applicable Rules

Companies (Management and Administration) Rules, 2014

[Effective from 1st April, 2014]

Rule 9. Declaration in respect of beneficial interest in any shares.—(1) 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 No. MGT. 4 [2][***], within a period of thirty days from the date on which his name is entered in the register of members of such company:

Provided that 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 [2][***].

(2) 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 [3][***], within thirty days after acquiring such beneficial interest in the shares of the company:

Provided that 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 [3][***].

(3) Where any declaration under section 89 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.

[Provided that nothing contained in this rule 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.][1]

[1]Inserted by the Companies (Management and Administration) Second Amendment Rules, 2014 vide Notification No. G.S.R. 537(E) dated 24th July, 2014

[2] Omitted words “in duplicate” by the Companies (Management and Administration) Amendment Rule, 2016 vide Notification No. G.S.R. 908(E)  dated 23rd September, 2016.

[3] Omitted words “in duplicate” by the Companies (Management and Administration) Amendment Rule, 2016 vide Notification No. G.S.R. 908(E) dated 23rd September, 2016.

[4] Omitted words”within the time specified under section 403″ by the Companies (Amendment) Act 2017 vide Notification No. S.O. 1833(E)  dated 7^th May, 2018.

[5] Substituted for the words”under the first proviso to sub-section (1) of section 403″ by the Companies (Amendment) Act 2017 vide Notification No. S.O. 1833(E)  dated 7^th May, 2018.

[6] Inserted by Companies Amendment Act, 2017 vide notification no F. No. 1/1/2018-CL.I dated 13th June 2018.