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Difference Between Section 89 and 90

Important Difference Between Section 89 and 90 of The Companies Act 2013: The Companies Act is a crucial piece of legislation that governs the functioning and management of companies in many countries. Two key sections of the Companies Act, namely Section 89 and Section 90, outline important provisions regarding the declaration of beneficial ownership and the maintenance of a register of significant beneficial owners. Let’s delve into these sections in simple terms to understand the Difference Between Section 89 and 90.

Section 89: Declaration of Beneficial Ownership

Section 89 of the Companies Act pertains to the declaration of beneficial ownership by individuals holding significant interests in shares of a company. In simpler terms, it requires any person who holds beneficial ownership of shares in a company to disclose their ownership to the company. Beneficial ownership refers to the true owner of shares, even if the shares are held in the name of another person or entity.

The purpose of Section 89 is to promote transparency and accountability in corporate ownership structures. By requiring individuals with significant interests in company shares to declare their ownership, the law aims to prevent the concealment of ownership, which could be used for illicit purposes such as money laundering or tax evasion. Companies are obligated to maintain a register of such declarations, which can be inspected by regulatory authorities and stakeholders to ensure compliance with the law.

Difference Between Section 89 and 90
Difference Between Section 89 and 90

Section 90: Maintenance of Register of Significant Beneficial Owners

Section 90 of the Companies Act focuses on the maintenance of a register of significant beneficial owners by companies. Unlike Section 89, which deals with the declaration of beneficial ownership by individuals, Section 90 places the responsibility on companies to identify and maintain a register of significant beneficial owners. A significant beneficial owner is defined as an individual who holds ultimate beneficial ownership of shares or has significant influence or control over the company.

The primary objective of Section 90 is to enhance transparency and accountability in corporate governance by ensuring that companies are aware of the individuals who ultimately own or control significant portions of their shares. Companies are required to take reasonable steps to identify significant beneficial owners and maintain a register containing details such as their names, addresses, nature of ownership, and extent of beneficial interest. This register must be updated regularly and made available for inspection by regulatory authorities and shareholders.

Difference Between MGT 6 and BEN 2 as per the Indian Companies Act 2013

In the Indian Companies Act, 2013, both Form MGT-6 and Form BEN-2 serve distinct purposes related to corporate governance and compliance. Here’s a breakdown of the differences between the two forms:

  1. Purpose:
    • Form MGT-6: This form pertains to the disclosure of beneficial ownership by the company. It is used to report any changes in beneficial ownership or holdings of significant beneficial owners (SBOs) in a company.
    • Form BEN-2: This form is specifically designed for reporting significant beneficial ownership. It is used by individuals or entities holding significant beneficial interest in shares of a company to declare their ownership to the company.
  2. Applicability:
    • Form MGT-6: It is typically filed by the company itself to report changes in beneficial ownership as required under Section 89(4) of the Companies Act, 2013, and Rule 9(5) of the Companies (Management and Administration) Rules, 2014.
    • Form BEN-2: It is filed by individuals or entities holding significant beneficial interest in shares of a company, as mandated by Section 90 of the Companies Act, 2013, and the corresponding rules.
  3. Entities Filing the Form:
    • Form MGT-6: Filed by the company to report changes in beneficial ownership.
    • Form BEN-2: Filed by the significant beneficial owner (SBO) to declare their beneficial interest in the shares of the company.
  4. Information Required:
    • Form MGT-6: Typically includes details of changes in beneficial ownership, such as the particulars of the new beneficial owner, the nature and extent of their interest, etc.
    • Form BEN-2: Requires disclosure of significant beneficial ownership details, including the name, address, and details of the significant beneficial owner, as well as the nature and extent of their interest in the shares of the company.
  5. Timeframe for Filing:
    • Both forms have specific timelines prescribed for filing as per the Companies Act, 2013, and the corresponding rules. Failure to file within the stipulated timeframe may attract penalties and non-compliance provisions.

In summary, while both Form MGT-6 and Form BEN-2 relate to the disclosure of beneficial ownership, they differ in terms of the entities filing the form, the purpose of filing, and the information required. Both forms are crucial for ensuring transparency and compliance with corporate governance norms under the Companies Act, 2013.

Who is the Registered Owner?

The registered owner, also known as the legal owner, is the individual or entity whose name is officially recorded as the owner of an asset or property in the relevant legal or official records. In the context of corporate governance and securities, the registered owner is the entity whose name appears on the official records of ownership maintained by a registrar, depository, or relevant authority.

For example, in the context of company shares, the registered owner is the individual or entity whose name is listed as the owner in the company’s register of members. This register is maintained by the company and contains details of shareholders, including their names, addresses, and the number of shares they own.

The registered owner holds legal title to the asset or property and is entitled to certain rights associated with ownership, such as voting rights, dividends, and other benefits. However, in certain situations, the registered owner may not be the ultimate beneficiary of the asset or property, especially in cases where the ownership is held in trust, nominee arrangements, or through intermediaries.

Overall, the registered owner is the party officially recognized as the owner in the relevant records, and their name is used for legal and administrative purposes related to the asset or property.

Who is the Beneficial Owner?

The beneficial owner, also known as the beneficial interest holder, is the individual or entity that ultimately enjoys the benefits of ownership or exercises control over an asset, property, or security, regardless of whether their name appears on the official records as the registered owner. In the context of corporate governance and securities, the beneficial owner is the party who has a significant interest in or controls the asset or security, even if legal title is held by another entity.

Here are some key points about beneficial ownership:

  1. Control and Enjoyment: The beneficial owner is the party who exercises control over the asset or security and enjoys the economic benefits associated with ownership, such as receiving dividends, voting rights, or proceeds from the sale of the asset.
  2. Disclosure Requirement: In many jurisdictions, including India, there are legal requirements to disclose beneficial ownership, particularly in the context of companies and securities. This is aimed at promoting transparency and preventing activities such as money laundering and tax evasion.
  3. Examples of Beneficial Ownership: Beneficial ownership can arise in various situations, such as:
    • When shares are held in trust for the benefit of another party.
    • When shares are held by nominees or intermediaries on behalf of the actual owners.
    • When shareholders have significant control or influence over a company’s decisions, even if their shareholdings are not directly registered in their name.
  4. Identifying Beneficial Owners: Identifying beneficial owners can be challenging, especially in complex ownership structures involving multiple layers of ownership, trusts, or nominee arrangements. However, it is essential for regulatory compliance and due diligence purposes.
  5. Legal and Regulatory Implications: Understanding beneficial ownership is crucial for compliance with laws and regulations related to corporate governance, anti-money laundering (AML), know your customer (KYC), and tax reporting.

Overall, the beneficial owner is the party with the ultimate interest in or control over an asset, property, or security, and their identification is essential for ensuring transparency and accountability in financial transactions and corporate activities.

Registered owner and Beneficial owner

The terms registered owner and beneficial owner refer to different legal concepts, particularly in the context of ownership of assets or securities. Here’s a breakdown of the differences between the two:

  1. Registered Owner:
    • The registered owner is the individual or entity whose name appears on the official records of ownership maintained by a registrar or relevant authority.
    • This ownership is formally recorded in the books of the company, institution, or relevant authority responsible for maintaining ownership records.
    • The registered owner has legal title to the asset or security and is typically entitled to certain rights associated with ownership, such as voting rights, dividends, and other benefits.
  2. Beneficial Owner:
    • The beneficial owner is the individual or entity that ultimately enjoys the benefits of ownership, regardless of whether their name appears on the official records.
    • This concept is often relevant in situations where assets or securities are held in trust, nominee arrangements, or through intermediaries.
    • The beneficial owner may not be the same as the registered owner; instead, they are the party who exercises control over the asset or security and receives the economic benefits associated with ownership.
    • Identifying the beneficial owner is crucial for transparency and compliance purposes, particularly in areas such as anti-money laundering (AML) regulations and Know Your Customer (KYC) requirements.

In summary, while the registered owner is the entity whose name is officially recorded as the owner in the relevant records, the beneficial owner is the party who ultimately enjoys the benefits and controls the asset or security, even if their name does not appear on the official records.

Key Differences Between Section 89 and Section 90:

  1. Focus of Provision: Section 89 focuses on the obligation of individuals holding significant interests in company shares to declare their beneficial ownership to the company, whereas Section 90 places the responsibility on companies to maintain a register of significant beneficial owners.
  2. The subject of Compliance: Under Section 89, individuals holding beneficial ownership of shares are required to comply with the declaration requirements, while under Section 90, companies are mandated to comply with the obligation to maintain a register of significant beneficial owners.
  3. Purpose of Provision: Section 89 aims to prevent the concealment of beneficial ownership and promote transparency in corporate ownership structures, while Section 90 aims to ensure that companies are aware of the individuals who hold significant beneficial ownership or control over their shares to enhance corporate governance and accountability.

In conclusion, while both Section 89 and Section 90 of the Companies Act are aimed at promoting transparency and accountability in corporate ownership structures, they differ in their focus and the entities responsible for compliance. Section 89 addresses the declaration of beneficial ownership by individuals, while Section 90 deals with the maintenance of a register of significant beneficial owners by companies. Understanding these provisions is essential for companies to ensure compliance with the law and uphold good corporate governance practices.

By csannusharma

CS Annu Sharma is a highly qualified and experienced professional in the field of Company Secretarial and Legal activities. With an impressive academic background and relevant certifications, she has demonstrated exceptional expertise and dedication in her career. Education: Qualified Company Secretary (CS) from the Institute of Company Secretaries of India (ICSI). Graduate in Law from Indraparasth Law College, enabling a strong legal foundation in her professional journey. Graduate in Commerce from Delhi University, providing her with a comprehensive understanding of financial and business concepts. Certifications: Certified CSR Professional from the Institute of Company Secretaries of India (ICSI), showcasing her commitment to corporate social responsibility and ethical business practices. Work Experience: She possesses an extensive and diversified work experience of more than 6 years, focusing on Secretarial and Legal activities. Throughout her career, she has consistently showcased her ability to handle complex corporate governance matters and legal compliance with utmost efficiency and precision. Current Position: Currently, Mrs. Annu holds a prominent position in an NSE Listed Entity, namely Globe International Carriers Limited, based in Jaipur. As a key member of the organization, she plays a vital role in ensuring compliance with regulatory requirements, advising the management on corporate governance best practices, and safeguarding the company's interests. Professional Attributes: Thorough knowledge of corporate laws, regulations, and guidelines in India, enabling her to provide strategic insights and support in decision-making processes. Expertise in handling secretarial matters, including board meetings, annual general meetings, and other statutory compliances. Proficiency in drafting legal documents, contracts, and agreements, ensuring accuracy and adherence to legal requirements. Strong understanding of corporate social responsibility and its impact on sustainable business practices. Excellent communication and interpersonal skills, enabling effective collaboration with various stakeholders, both internal and external. Personal Traits: Mrs. Annu Khandelwal is known for her dedication, integrity, and commitment to maintaining the highest ethical standards in her professional conduct. Her meticulous approach to work and attention to detail make her an invaluable asset to any organization she is associated with. Conclusion: Cs Annu 's profile exemplifies a highly qualified and accomplished Company Secretary, well-versed in legal matters and corporate governance. With her wealth of experience and commitment to excellence, she continues to contribute significantly to the success and growth of the organizations she serves.

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