Significant Beneficial Owner Rules explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 90 of the Companies Act, 2013 makes individuals who hold significant beneficial interests in a company declare them, and makes the company identify them, keep a register and file a return. The Companies (Significant Beneficial Owners) Rules, 2018 carry the detail and were amended in 2019 and 2024. This guide reads the Act in the Ministry's consolidated text (last updated 29 July 2022) and the Rules as consolidated in the Ministry's e-book, consulted on 3 October 2026. Later amendments should be checked.
A significant beneficial owner (SBO) is an individual who holds, directly or indirectly, not less than ten per cent of the shares, voting rights or distributable dividend, or who has the right to exercise, or actually exercises, significant influence or control other than through direct holdings alone (rule 2(1)(h)). The reporting company must identify the SBO and cause a declaration in Form BEN-1 (rule 2A). The SBO declares within thirty days of acquiring or changing the interest (rule 3), and the company files Form BEN-2 within thirty days of receiving it (rule 4). The company also keeps the register in Form BEN-3 and designates a person for beneficial-interest information.
The Act: sections 89 and 90
Section 89 deals with beneficial interest in shares: a registered holder who does not hold the beneficial interest declares the beneficial holder; a person who holds or acquires a beneficial interest declares it; changes are declared within thirty days; the company notes the declaration in the register and files a return within thirty days. Section 89(10) says that 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 exercise any or all of the rights attached to the share or to receive or participate in any dividend or other distribution.
Section 90(1) says every individual who, acting alone or together, or through one or more persons or trust, including persons resident outside India, holds beneficial interests of not less than twenty-five per cent or such other percentage as prescribed in shares, or has the right to exercise, or actually exercises, significant influence or control (as defined in section 2(27)), over the company, makes a declaration to the company. The prescribed percentage in the Rules is ten. Section 90(2) requires a register; (4) a return to the Registrar; (4A) that every company takes necessary steps to identify an SBO and requires him to comply; (5) and (6) a notice to a person the company knows or has reasonable cause to believe is an SBO, answered within thirty days; (7) to (9) an application to the Tribunal within fifteen days of the expiry of the notice period for restrictions on the shares; and (10) and (11) penalties. For a plain-language overview, see our guide on beneficial ownership and SBOs.
If your company needs an SBO review, see our compliance advisory service.
The Rules, rule by rule
| Rule | What it prints |
|---|---|
| 2 | Definitions: "reporting company" (a company required to comply with section 90); "significant beneficial owner" with tests of ten per cent of shares, voting rights or the right to receive or participate in distributable dividend, held indirectly or together with direct holdings, or the right to exercise or actual exercise of significant influence or control other than through direct holdings alone; Explanations on direct and indirect holding, "acting together" and treatment of GDRs, compulsorily convertible preference shares and compulsorily convertible debentures as shares |
| 2A | Every reporting company shall take necessary steps to find out whether there is an SBO, identify him and cause him to make a declaration in Form BEN-1; where a member other than an individual holds not less than ten per cent of its shares, voting rights or dividend rights, give notice to that member in Form BEN-4 |
| 3 | The SBO files Form BEN-1 with the reporting company: within ninety days of the commencement of the 2019 Amendment Rules for existing SBOs, and within thirty days of acquiring or changing the interest |
| 4 | The reporting company files Form BEN-2 with the Registrar within thirty days of receipt of the declaration, with the prescribed fees |
| 5 | Register of SBOs in Form BEN-3; open for inspection during business hours for not less than two hours on every working day as the Board decides, on payment of a fee not exceeding fifty rupees per inspection |
| 6 | Notice seeking information under section 90(5) in Form BEN-4 |
| 7 | Application to the Tribunal where a person fails to give the information or it is not satisfactory; the order may restrict transfer, suspend dividend or other distributions and voting rights, and other rights |
| 8 | The rules do not apply to the extent shares are held by the section 125(5) authority, the holding reporting company (reported in BEN-2), Government and Government-controlled bodies, SEBI-registered investment vehicles, and investment vehicles regulated by RBI, IRDAI or PFRDA, as listed |
How the 2019 and 2024 amendments appear in the e-book
The e-book's notes show:
- 2019 (8 February 2019): substituted rule 2 (new definitions, including "control", "majority stake", "partnership entity", "reporting company" and the detailed tests), inserted rule 2A, substituted rules 3, 4, 7 and 8. The notes quote the old rule 2(e) (ten per cent "ultimate beneficial interest") and rule 3, which read differently.
- Second amendment, 2019 (1 July 2019): substituted Form BEN-2.
- 2024: the notes to rules 4 and 8 record a substitution by the Amendment Rules, 2024, in connection with the reference to Form BEN-2. The e-book prints no detail beyond this; check the notification for what the 2024 form requires.
Wording in the notes under each rule is the old text and not law.
The designated person: rule 9 of the Management and Administration Rules
Rule 9(4) to (8) of the Companies (Management and Administration) Rules, 2014 (inserted in 2023) require every company to designate a person responsible for furnishing, and extending co-operation in providing, information to the Registrar or any authorised officer on beneficial interest in shares. The company may designate a company secretary (if one is required), a key managerial personnel other than the company secretary, or every director if there is neither. Until a person is designated, the deemed designation is the company secretary (if required), else every managing director or manager, else every director. The company informs the details of the designated person in the annual return, and intimates a change in e-form GNL-2. Rule 9(1) to (3) separately cover declarations of registered and beneficial owners in MGT-4 and MGT-5 and the company's return in MGT-6; see our guide on filing BEN-2. For the annual return changes, see our article on the revised MGT-7 and AOC-4 forms.
Penalties in section 90
- An SBO who fails to declare: fifty thousand rupees, plus a further one thousand rupees for each day after the first, subject to a maximum of two lakh rupees (section 90(10)).
- A company that fails to maintain the register, file the information, take steps under (4A) or allow inspection: one lakh rupees plus five hundred rupees a day, up to five lakh rupees; each officer in default twenty-five thousand rupees plus two hundred rupees a day, up to one lakh rupees (section 90(11)).
- Wilful false information: action under section 447 (section 90(12)).
Worked example (invented names)
Orion Components Limited has a member, Orion Holdings Pte Ltd, a foreign company holding 40 per cent of its shares. Ms Mira Shah holds 60 per cent of Orion Holdings Pte Ltd, a majority stake in that member. Under rule 2(1)(h) and Explanation III, she holds a right indirectly through a body corporate member in which she holds a majority stake. Her indirect holding in Orion Components is the 40 per cent held through the member, so she is an SBO at the ten per cent test. Under rule 2A the company gives notice to the member in Form BEN-4, causes Ms Shah to file BEN-1, files BEN-2 within thirty days of receiving it, and records her in the BEN-3 register.
Common mistakes
- Waiting for the SBO to come forward instead of acting under rule 2A.
- Missing the thirty-day BEN-2 filing.
- Not keeping BEN-3, or not allowing inspection.
- Not naming the designated person in the annual return.
- Assuming the 2018 text of the rules without checking the 2019 and 2024 amendments.
Need help with SBO compliance?
We can map your shareholding chain, send the notices, collect declarations and file the returns. See our compliance advisory service.
Key takeaways
- The rule 2(1)(h) test is ten per cent, direct or indirect, or significant influence or control.
- The reporting company must itself identify SBOs (rule 2A).
- BEN-1 within thirty days of the interest or change; BEN-2 within thirty days of receipt.
- Register in BEN-3; notice in BEN-4.
- Designated person details go in the annual return.
Read next
- Compliance Calendar for an Indian Subsidiary of a Foreign Company
- Significant Beneficial Owners in an LLP Under the LLP SBO Rules, 2023
- Beneficial Ownership and SBOs Under the Companies Act
- How to File BEN-2
Disclaimer: Based on the Companies Act, 2013 in the Ministry of Corporate Affairs consolidated text (last updated 29 July 2022), the Rules as consolidated in the Ministry's e-book and the other official texts named in this article, as consulted on 3 October 2026. Later amendments, notifications, circulars, forms and fees should be checked. Formats are general drafts to be adapted to the company's articles and facts. This article is general information, not legal advice; check the official text before acting.