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Meaning of Beneficial Interest

For the purposes of section 89 and section 90, 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—

(i) exercise or cause to be exercised any or all of the rights attached to such share; or

(ii) receive or participate in any dividend or other distribution in respect of such share

Declaration Requirements for Registered Owners

As per Section 89 (1) read with Rule 9 (1) of the Companies (Management and Administration) Rules, 2014:

When an individual’s name is recorded in the membership register but that person does not hold the actual beneficial interest, specific disclosure obligations arise. The registered owner must submit a declaration within thirty days of their name being entered in the register. This declaration should identify the person who holds the beneficial interest and describe the nature of that interest.

The prescribed form for this purpose is MGT-4. Initially, regulations required duplicate filing, but subsequent amendments have eliminated this requirement.

Provided that where any change occurs in the beneficial interest in such shares, the registered owner shall, within a period of thirty days from the date of such change, make a declaration of such change to the company in Form No.MGT.4

Declaration Requirements for Beneficial Owners

Individuals who hold or acquire beneficial interest in shares have corresponding obligations. Within thirty days of acquiring such interest, they must inform the company about the nature of their interest and provide details of the person in whose name the shares are registered. The prescribed form for beneficial owners is MGT-5.

Provided that where any change occurs in the beneficial interest in such shares, the beneficial owner shall, within a period of thirty days from the date of such change, make a declaration of such change to the company in Form No.MGT.5

Company’s Compliance Obligations

Companies should establish systematic procedures to handle beneficial interest declarations. Upon receiving form MGT-4 from registered owners or form MGT-5 from beneficial owners, the company shall make a note of such declaration in the register concerned

Within thirty days of receipt, the company must file a return in form No. MGT-6 with the Registrar of Companies, ensuring all required fees are paid. Additionally, all statutory registers must be updated to reflect the declared beneficial interests.

Maintaining accurate records and adhering to timelines is essential for compliance. Company secretaries should implement tracking mechanisms to monitor declaration receipts and ensure timely filings with regulatory authorities.

Exemptions for Certain Trusts

Regulatory provisions provide exemptions for specific types of trusts. Trusts created to establish Mutual Funds, Venture Capital Funds, or other funds approved by the Securities and Exchange Board of India (SEBI) are exempt from filing the declarations required under this section. This exemption came into effect in July 2014 and recognizes the regulated nature of these investment vehicles.