By Sharad Abhyankar, Anuj Shah, Virja Dange
The concept that companies are independent corporate personalities and have separate juristic nature has been often misused for illicit purposes, including money laundering and other illegal activities. To bring transparency to the manner in which
shares of companies are held, and in compliance of India’s obligations to align its regulatory framework with the recommendations of Financial Action Task Force, an
intergovernmental organization constituted to formulate policies to combat money
laundering and terror financing, the Ministry of Corporate Affairs (MCA) notified on 13
June 2018 (i) Section 90 of the Companies Act, 2013 (Act); and (ii) the Companies
(Significant Beneficial Owners) Rules, 2018 (SBO Rules). These prescribe detailed
requirements for identifying the individuals who hold ‘ultimate’ control over a company.
Section 90 of the Act requires every individual who, either by himself or with others (including a trust and persons resident outside India), qualifies as a significant beneficial
owner (SBO) of a company to make a declaration to that company specifying the nature of his beneficial interest.