The legislation was first passed in June 2018 and required companies to comply by mid-September last year.
However, due to claims that the rules were unclear, the bill was amended earlier this year.
As of 9 May 2019, all significant beneficial owners of a company need to have declared their interest to their company.
Stricter rules and wider reach
Under the latest amendment, a ‘significant beneficial owner’ (SBO) is defined as someone who has at least 10% of the company ownership.
In the legislation’s remit are both resident and foreign owners who are required to declare the nature of their interest to that company.
Additionally, people who have the right to exercise significant control or influence over the company, need to be declared too.
Businesses had 90 days to comply with the amendment – with the transitional period ending on 9 May 2019.
Failing to disclose
Going forward, every person who becomes an SBO or changes their SBO status must communicate it within 30 days and the companies have the duty to report the changes to the official registrar.
Failure to disclose such changes will result in fines or, in the worst-case scenario, imprisonment for the SBO.
Companies would also need to apply for a restrictive order on the owner’s rights to sell their shares or receive dividends, but the SBO can always contest such provision.
Critiques still present
Indian law firm Cyril Amarchand Mangaldas, however, said there are still some grey areas in the applicability of the bill.
Radhika Gaggar, partner, and Shaishavi Kadakia, principal associate, jointly said: “First, the SBO rules expressly provide for a situation in which the first layer above the reporting company (i.e., the member) is a trust, but they do not contemplate a multi-layered hybrid structure with a company as the direct member and a trust as the ultimate holding entity.
“Second, the SBO rules do not set out the way to determine an SBO if a discretionary trust is a member of the reporting company and the trustee of such trust is not an individual. As a result, a vacuum exists in respect of those discretionary trusts whose trustee is a private trustee company or professional trustee.
“There has been a recent shift towards hybrid structures and trusts, including with sole corporate trustees, and, accordingly, depending on the factual situation, disclosures for such structures will bear further consideration.”