—Guide
Significant Beneficial Ownership (BEN-1, BEN-2) in India: Who Counts and What to File
Who counts as a significant beneficial owner under the Companies Act, when BEN-1 and BEN-2 are needed, and how layered or foreign ownership is handled.
The share register shows who owns a company on paper. But when shares are held through a holding company, a trust or a chain of entities, the individuals who really own or control it can be several layers away. India's significant beneficial ownership rules require those individuals to be identified and reported to the Registrar. This guide explains who counts, and what the company and the owner each have to file.
Who Is a Significant Beneficial Owner?
Under Section 90 of the Companies Act, 2013 and the Companies (Significant Beneficial Owners) Rules, 2018, a significant beneficial owner (SBO) is an individual who, alone or together with others, directly or indirectly:
- Holds at least 10% of the company's shares.
- Holds at least 10% of the voting rights.
- Has the right to receive at least 10% of any dividend.
- Has the right to exercise, or actually exercises, significant influence or control over the company, other than through a direct shareholding.
The key word is indirectly. If a company is 40% owned by another company, the individuals who control that parent can be SBOs of the first company, even though their names never appear on its share register.
When BEN-2 usually isn't needed
If the individuals hold their shares directly, in their own names, the register of members already shows who owns the company, and they generally aren't treated as SBOs for this purpose. For many small founder-owned companies, there's nothing to report. The rules become relevant once ownership runs through another entity.
The Forms
BEN-1: the owner's declaration
The significant beneficial owner files BEN-1 with the company, declaring the nature and extent of their holding. It has to be given within 30 days of becoming an SBO, and again within 30 days of any change in their holding.
BEN-2: the company's return
Within 30 days of receiving a BEN-1, the company files BEN-2 with the Registrar of Companies, reporting the SBO's details.
BEN-3: the register
The company keeps a register of significant beneficial owners in Form BEN-3, open to inspection by members.
BEN-4: the company's notice
A company must take steps to identify its SBOs. If it believes someone may be an SBO, or a member holds at least 10% on someone else's behalf, it can send a notice in BEN-4 asking for the information.
Common Situations
- A startup whose investor is a fund or a foreign holding company: the individuals who control that investor may need to be identified.
- A company owned by a family trust: the trustees, beneficiaries or settlor, depending on the trust's structure, may be SBOs.
- An Indian subsidiary of a foreign group: the ultimate individual owners at the top of the group structure are the ones to identify.
- Shares held by a nominee on someone's behalf: the person the nominee acts for is the beneficial owner.
Why It Matters
The penalties for not complying with the SBO rules are among the heaviest for any routine filing. They can apply both to an individual who fails to declare their holding in BEN-1 and to a company that fails to identify its SBOs or file BEN-2, and can run into lakhs. Banks increasingly ask for beneficial ownership information when opening accounts, and investors check it against the cap table during due diligence.
A Checklist
- Map the company's full ownership chain, up to the individuals at the top.
- Identify anyone who reaches the 10% threshold indirectly, or has significant influence or control.
- Collect BEN-1 declarations from them.
- File BEN-2 within 30 days of each declaration.
- Update the BEN-3 register, and repeat whenever ownership changes.
Getting Help
Think Filing maps ownership structures, identifies significant beneficial owners, and handles the BEN-1, BEN-2 and BEN-3 paperwork, including for companies with foreign or layered ownership.