Significant Beneficial Ownership and Form BEN-2: The Filing Foreign Groups Forget (2026)

Written by the Delhi Legal Company India Entry & FDI Advisory team · Last updated August 2026 · Reviewed quarterly against MCA notifications and ROC adjudication orders

Introduction

The Registrar of Companies has penalised the chief executive of Microsoft over an Indian subsidiary’s beneficial ownership filing.

The Registrar of Companies penalised LinkedIn Technology Information Private Limited, its directors, and senior executives of its global holding company Microsoft Corporation, including CEO Satya Nadella and LinkedIn CEO Ryan Roslansky.

That is the clearest available statement of what Section 90 actually reaches. It is not a filing that stays inside the Indian entity. It looks up the ownership chain to the natural persons at the top, and when it is not complied with, the people it identifies are within scope of the penalty.

Most foreign groups have never heard of it. The Indian company secretary files AOC-4 and MGT-7, the tax team files the returns, and Form BEN-2 sits outside everyone’s list because it is triggered by the shape of the group rather than by a date in the calendar.

There is also a specific trap for foreign-owned companies. The Act contains an exemption where shares are held by a holding reporting company. Groups assume that covers them. It does not: an overseas holding company having a subsidiary in India is not eligible for exemption under Section 90 as a holding reporting company, and the subsidiary company needs to file BEN-2.

This guide explains who your SBO is, how to trace them through a layered structure, what has to be filed and when, and what happens when it is not.

About this guide

Delhi Legal Company works exclusively with foreign companies establishing and operating in India. Significant beneficial ownership is the compliance item that most reliably surprises a foreign group, because nothing about the Indian entity’s operations triggers it — the trigger sits in the parent’s own cap table.

Where a rule is settled we state it and cite the source. Where the analysis depends on the structure — trusts, funds, layered holdings — we set out the approach rather than a single answer, because the answer changes with the chain.

Primary sources: the Ministry of Corporate Affairs for the Companies Act, 2013, the Companies (Significant Beneficial Owners) Rules, 2018, and ROC adjudication orders.

1. What this is, and why India has it

Significant Beneficial Ownership is a concept under Section 90 of the Companies Act, 2013, read with the Companies (Significant Beneficial Owners) Rules, 2018. It requires companies to identify the natural persons who ultimately own or control the company, beyond the names listed in the register of members, and report them to the ROC.

The framework was introduced based on recommendations from the Financial Action Task Force, the global standard-setting body for anti-money laundering. FATF standards require every jurisdiction to ensure transparency about who truly owns or controls corporate entities. India implemented this through Section 90 and the SBO Rules to prevent the misuse of corporate structures for money laundering, tax evasion, round-tripping of funds, and benami transactions.

Understanding the purpose helps with the analysis. The question the law asks is not “who is the shareholder” — the register of members already answers that. It asks who, at the end of the chain, actually benefits or controls.

The law looks through structures, not at them.

2. The definition, and the two features that catch groups out

Under Rule 2(1)(h) of the SBO Rules, a Significant Beneficial Owner is an individual who possesses one or more specified rights or entitlements in the reporting company — the company in respect of which the SBO declaration is required to be filed.

2.1 Only individuals can be SBOs

Only individuals can be SBOs. Companies, LLPs, trusts, or firms are only routes, not SBOs themselves.

This is where most first attempts at the analysis stop too early. A group whose Indian subsidiary is wholly owned by a Cayman holding company, which is owned by a Delaware parent, which is owned by three funds, has not identified its SBO by naming the Cayman company. The analysis continues until it reaches a natural person, or establishes that no natural person meets the threshold.

2.2 The holding must be indirect

Indirect holding is mandatory for the consideration of a significant beneficial owner.

The definition captures an individual who holds indirectly, or indirectly together with direct holdings. A purely direct holding does not make someone an SBO — that person is simply a member, and the register of members already discloses them.

The point of the regime is to reveal what the register does not.

2.3 The threshold moved from 25% to 10%

Earlier, the threshold was 25%. It has now been tightened to 10%.

A great deal of published material and internal group documentation still references 25%. If a checklist or a legal memo you are working from uses that figure, it predates the current rules and everything else on it should be checked.

3. The four tests

The tests are that the individual holds indirectly, or together with direct holdings, not less than 10% of the shares of the reporting company; or not less than 10% of the voting rights in the shares; or has the right to receive or participate in not less than 10% of the total distributable dividend or other distribution; or has the right to exercise, or actually exercises, significant influence or control in any manner other than through direct holdings alone.

Test	What it captures
10% of shares	The ordinary case, traced through the chain
10% of voting rights	Catches structures where voting and economic rights diverge, such as dual-class shares
10% of distributable dividend or other distribution	Catches economic entitlement separated from shareholding
Significant influence or control	The qualitative test — no percentage required

Any one is sufficient. A structure that carefully keeps every individual below 10% on shares can still produce an SBO through the voting rights limb or the influence limb.

3.1 What significant influence means

Significant influence means the power to participate directly or indirectly in the financial and operating policy decisions of a reporting company, but is not control or joint control of those policies.

Note that this sets a lower bar than control. Someone need not control the company to be an SBO; participation in policy decisions is enough.

3.2 Where influence comes from, if not from shares

Since holding by way of 10% or more is already a criterion for determination of SBO, significant influence or control must be exercised by way of any agreement or written understanding.

This directs the search. If no individual crosses 10% on the numeric tests, look at the agreements: the shareholders’ agreement, investor rights agreements, board nomination rights, veto or reserved matter provisions, management agreements.

Influence can matter more than shareholding. An individual with a board nomination right and a veto over the annual budget may be an SBO on a 6% holding.

4. The exemption foreign groups think they have

The SBO Rules exempt shares held by certain entities, including where the member is a holding reporting company, provided the details of that holding reporting company are reported.

Foreign groups read that and conclude that because their Indian subsidiary’s shares are held by the parent, and the parent is disclosed, nothing further is required.

That reading is wrong, and the reason is precise.

If there is any overseas holding company having a subsidiary in India, such holding company is not eligible for exemption under Section 90 as a holding reporting company. The subsidiary company needs to file BEN-2 as per the provisions of Section 90.

The exemption works where the member is itself a reporting company — that is, an Indian company subject to the same regime, whose own SBO disclosures are on the Indian register. An overseas company is not a reporting company, so the chain does not stop there. The analysis must continue upward to the ultimate individuals.

4.1 Why this catches almost every foreign-owned subsidiary

Consider the standard structure: an Indian private limited company wholly owned by a foreign parent, which in turn has its own shareholders.

Because the immediate member is an overseas company, no exemption applies. The Indian company must look through the overseas parent to identify individuals who, indirectly, meet any of the four tests in relation to the Indian company.

Where the overseas parent is closely held — a founder-owned business, a family group, a company with two or three individual shareholders — there will almost certainly be an SBO. Where it is widely held or listed, there may be none, but the analysis still has to be done and documented.

5. Tracing the chain: how to actually do this

The analysis is mechanical once the structure is mapped. What makes it hard is that most groups have never mapped the structure to individual level.

5.1 Step one: draw the chart to natural persons

Start at the Indian company and work upward, entity by entity, until every branch terminates in either a natural person, a listed company with dispersed ownership, or an entity within an exemption.

Record percentages at each level. You will need them, and the same chart feeds the incorporation and FDI analysis.

5.2 Step two: compute indirect holdings

An individual’s indirect holding in the Indian company is derived through the chain. Where an entity in the chain is majority owned or controlled by the individual, the rules attribute the entity’s holding to that individual rather than proportionately.

This is the point where intuition misleads. Groups often multiply percentages down the chain and conclude nobody reaches 10%. The rules do not always work that way, and the attribution mechanics differ depending on the type of entity in the chain.

Get this computed by someone who does it regularly rather than assuming arithmetic.

5.3 Step three: read the agreements

Having tested the numeric limbs, test the influence limb against every agreement that confers rights: shareholders’ agreements, investment agreements, board nomination rights, reserved matters, management or advisory agreements.

5.4 Step four: document the conclusion, including a negative one

If the analysis concludes that there is no SBO, that conclusion should be documented with the chart, the computations and the agreements reviewed.

Form BEN-2 is mandatory only when a reporting company has an identified Significant Beneficial Owner who has filed Form BEN-1. A company with no individual crossing the 10% indirect threshold and no person exercising significant influence has no filing to make.

But “we did the analysis and there is no SBO” is a defensible position only if the analysis exists. “Nobody looked” is not the same thing, and Section 90 imposes a positive duty to take steps to identify.

6. The four forms

Form	Who files it	To whom	When
BEN-1	The individual SBO	The reporting company	Within 30 days of becoming an SBO, and of any change
BEN-2	The reporting company	The Registrar of Companies	Within 30 days of receiving the BEN-1 declaration
BEN-3	The reporting company	Maintained internally	Register of significant beneficial owners, kept current
BEN-4	The reporting company	Persons it suspects hold beneficial interests	Where the company cannot identify its SBOs

6.1 The sequence matters

Collect the signed BEN-1 declaration from the Significant Beneficial Owner and confirm the date of receipt. The BEN-2 clock runs from that date.

Which produces a practical problem for foreign groups: the individual who must sign BEN-1 is usually at the top of the overseas group, has never heard of the form, and may take weeks to be persuaded to sign a declaration to an Indian company they have no operational involvement with.

Build that into the timeline. Approaching the ultimate beneficial owner for a signature is a relationship exercise, not an administrative one.

6.2 BEN-4: what to do when you cannot identify

If a company fails to identify its Significant Beneficial Owners, it must issue BEN-4 notices to persons it suspects hold beneficial interests.

This matters because it is the company’s discharge mechanism. Where a member will not co-operate or the chain cannot be traced, the company issues notice and, if a satisfactory response is not received, may apply to the Tribunal.

A company that has issued BEN-4 notices and pursued the process is in a very different position from one that has done nothing.

6.3 Filing mechanics

Submission is made electronically via the MCA V3 portal, and requires a valid professional certificate and a Digital Signature.

Ensure the signing director’s DSC is valid before the 30 days start running. An expired DSC discovered on day 28 is an avoidable default.

7. Timelines

Event	Obligation	Period
Individual becomes an SBO	File BEN-1 with the company	30 days
Company receives BEN-1	File BEN-2 with the ROC	30 days
Change in SBO details	Fresh BEN-1 to the company	30 days of the change
Company receives revised BEN-1	Updated BEN-2 and update the BEN-3 register	30 days
Company cannot identify an SBO	Issue BEN-4 notices	Promptly, and follow through

7.1 What counts as a change

This is under-appreciated. A change at any level of the chain can change the SBO position for the Indian company, even where nothing about the Indian company’s own shareholding has moved.

A funding round at the parent that dilutes a founder below 10%. A secondary sale between shareholders two levels up. A new shareholders’ agreement conferring board rights. A restructuring that inserts a new holding company.

None of those events happens in India, none of them is visible to the Indian company secretary, and each can trigger a fresh BEN-1 and BEN-2.

7.2 The control that actually works

A standing instruction at group level: any change in the parent’s cap table, any new investor agreement, and any group restructuring is notified to whoever handles Indian compliance.

Without that, the Indian company will find out at the next annual return, if at all.

8. Penalties

Non-compliance attracts penalties of up to ₹10 lakh for the company and ₹1 lakh for the individual SBO. Failure to take steps to identify SBOs or file BEN-2 attracts penalties of up to ₹10 lakh and continuing fines under Section 90(11).

8.1 Three parties, assessed separately

A breach of the SBO chain will result in each of the three categories of potential liable parties being assessed separately for the potential imposition of a penalty by the adjudicating authority.

The company, the officers in default, and the individual SBO are each separately liable. The penalty is not one amount shared between them.

8.2 The fraud exposure

Where any person wilfully furnishes false or incorrect information, or suppresses material information, in a declaration under Section 90, that person is liable to action for fraud under Section 447 of the Companies Act, 2013. This carries far heavier consequences than the monetary penalties.

Section 447 is a criminal provision carrying imprisonment and fines calibrated to the amount involved. This is the reason a BEN-1 declaration should be prepared carefully rather than signed as a formality: an inaccurate declaration is a materially different exposure from a late one.

8.3 The share restrictions

Section 90 also permits the Tribunal to restrict the shares in question.

This means no dividend payment, no voting rights, and no transfer of shares — effectively locking the non-compliant shareholder out until disclosure is made.

For a foreign parent, that is the consequence with real commercial bite. Restricted shares cannot receive a dividend, which closes the primary repatriation route, and cannot be transferred, which blocks an exit.

9. What enforcement actually looks like

9.1 The LinkedIn order

Two lessons from that. The Registrar was willing to look up the chain and name individuals at the ultimate parent. And the size and sophistication of the group provided no protection — if anything, the layered structure was the reason the analysis mattered.

9.2 The Contlo order

In a case from Bangalore, Contlo Technologies Private Limited delayed filing Form BEN-2 by 163 days after receiving a declaration from its SBO. The ROC imposed a penalty of ₹1,81,500 on the company and ₹57,600 each on two defaulting directors.

The company recognised the default and voluntarily filed for adjudication. The ROC provided a personal hearing and considered submissions before imposing penalties. This case illustrates that even belated compliance is better than none, but penalties will still apply.

The useful detail is the voluntary adjudication. A company that identifies its own default and comes forward is in a better position than one that waits to be found, though the penalty is not waived.

9.3 Where it surfaces commercially

Transactions stall simply because BEN filings were not complied with. The cost of delay often exceeds the penalty itself.

This is the exposure that usually concentrates minds. A missing BEN-2 discovered in diligence during a fundraise or a sale becomes a condition, a disclosure, an indemnity and a delay — and it is one of the easier items for a buyer’s counsel to find, because the absence of a filing is visible on the public record.

10. Complex structures

The analysis changes with the type of entity in the chain.

Entity in the chain	Who is examined
Company	Individuals holding a majority stake, traced upward
Partnership firm	Partners holding a majority stake
Hindu Undivided Family	The karta, deemed to hold 100% of the HUF
Private trust	The beneficiaries
Revocable trust	The author
Charitable trust	The trustees

Where a trust is a member of the reporting company, the trustees, beneficiaries or author, as the case may be, are responsible for filing BEN-1 with the reporting company.

10.1 Funds and institutional investors

Where the chain runs into a pooled investment vehicle or an institutional investor, exemptions may apply depending on the nature of the vehicle and its regulation.

This is where the analysis becomes genuinely technical and where a wrong conclusion is easy to reach in either direction — either treating a fund as an automatic stop, or attempting to look through a vehicle where an exemption applies. Take advice on the specific vehicle rather than applying a general rule.

10.2 LLPs

The SBO filing requirements under Section 90 and the SBO Rules, 2018 apply to companies registered under the Companies Act, 2013.

A parallel regime applies to limited liability partnerships under separate rules. Where a group has both an Indian company and an Indian LLP, both need to be assessed, under their respective frameworks. See our guide to LLP registration in India for foreign investors.

11. Where this connects to your other India obligations

The SBO analysis produces a document that several other processes need, which is an argument for doing it properly once rather than partially several times.

Obligation	Connection
Press Note 3	Beneficial ownership in a land-border country triggers the government approval route for FDI, in any sector — the same chart answers both questions
Downstream investment	Whether an Indian company is foreign-owned or foreign-controlled determines whether its acquisitions are indirect foreign investment
FDI reporting	FC-GPR and FC-TRS filings require investor details that come from the same structure — see FC-GPR, FC-TRS and RBI documentation
Bank KYC	Authorised dealer banks conduct beneficial ownership checks on the foreign parent as part of FEMA compliance; inconsistency between what the bank was told and what BEN-2 says is a problem
Transaction diligence	The first thing a buyer’s counsel checks is whether the public filings match the disclosed structure
Statutory registers	The BEN-3 register sits alongside the other registers — see maintaining statutory registers and board records

The Press Note 3 overlap is worth emphasising. Both regimes ask the same underlying question — who ultimately owns this — and a group that has done the SBO analysis has already produced most of what the FDI analysis needs. Groups that do neither discover both at the same time, usually at closing.

12. Three structures, worked through

Scenario A — The founder-owned overseas parent

An Indian subsidiary is wholly owned by a Singapore company. The Singapore company is owned 60% by its founder and 40% by two angel investors holding 20% each.

The analysis. The overseas parent is not a holding reporting company, so no exemption applies. The founder holds indirectly through the Singapore company and, on a majority-stake attribution, is an SBO of the Indian company. The two angels at 20% each require analysis of the attribution mechanics.

The filing. The founder files BEN-1 with the Indian company; the Indian company files BEN-2 within 30 days.

The practical difficulty. Persuading a founder in Singapore, with no involvement in Indian operations, to sign a statutory declaration to an Indian company. Start early and explain the Section 447 consequence of an inaccurate declaration, because that is what makes the exercise worth taking seriously.

Scenario B — The venture-backed group with no obvious SBO

An Indian subsidiary is owned by a Delaware parent. The Delaware parent’s cap table has four venture funds, a founder at 8%, an employee option pool, and a long tail of angels.

The analysis. On the numeric limbs, no individual obviously crosses 10% indirectly. But the analysis is not finished. Two further questions arise: do any of the funds fall within an exemption, or does the chain continue into their own structures; and does any individual exercise significant influence through the investment agreements — board seats, veto rights over financing and budget, protective provisions.

The likely outcome. Possibly no SBO, possibly one or more through the influence limb. Either way the conclusion must be documented, with the chart, the computation and the agreements reviewed.

The failure mode. Concluding “we are venture-backed, so there is no SBO” without doing the work. That is a position, not an analysis, and it does not survive a question from a buyer’s counsel.

Scenario C — The family trust two levels up

An Indian subsidiary is owned by a UK company, which is owned by a holding company, which is majority owned by a family trust.

The analysis. The trust is a route, not an SBO. Depending on the type of trust, the beneficiaries, the author or the trustees are examined. For a private trust the beneficiaries are considered; for a revocable trust the author.

The practical difficulty. Trust deeds are private, family arrangements are sensitive, and the individuals concerned may be reluctant to be named on an Indian public filing.

The point to make internally. The alternative is a default that is visible on the public record, carries penalties on the company, its directors and the individuals, and can result in the shares being restricted — which stops dividends and blocks any transfer.

13. Working the attribution: two examples

The computation is where most in-house attempts go wrong, because the intuitive approach and the rule-based approach give different answers.

13.1 The intuitive approach, and why it misleads

Take an Indian company wholly owned by a Singapore company, which is 60% owned by an individual.

The intuitive computation multiplies down the chain: 100% × 60% = 60%, comfortably above the threshold. That happens to reach the right conclusion here, but by the wrong route.

Now change the facts. The Singapore company holds 100% of the Indian company. An individual holds 30% of the Singapore company. Multiplying gives 30%, which looks like an SBO.

The rules do not work by simple multiplication. Where an entity sits in the chain, the test asks whether the individual holds a majority stake in that entity, or in the ultimate holding company of that entity. An individual with 30% of the Singapore company does not hold a majority stake, so the attribution does not run that way — and the analysis has to look at whether any other limb is met instead.

13.2 Where the minority holder still becomes an SBO

Continue with the 30% shareholder. On the shares limb, the attribution may not run. But three further questions remain open.

Does the individual hold a majority of the voting rights, through a dual-class structure or a voting agreement? Does the individual have a right to 10% or more of the distributable dividend of the Indian company, through any arrangement? And does the individual exercise significant influence through the shareholders’ agreement — a board seat, a veto over the budget, approval rights over material decisions?

A 30% shareholder with two board seats and a veto over financing is a strong candidate on the influence limb even where the numeric limbs do not bite.

13.3 What this means in practice

Two things. Do not conclude there is no SBO because the multiplication came out below 10% — that is not the test. And do not conclude there is an SBO on the same basis, because over-reporting has its own consequences: a BEN-1 declaration is a statutory statement, and naming someone as an SBO who is not one is its own form of inaccuracy.

Have the computation done by someone who does it regularly. This is one of the few areas of Indian compliance where the arithmetic itself is the technical part.

14. If you have already defaulted

Most foreign groups reading this discover they should have filed years ago. The question is what to do about it.

14.1 Do the analysis first

Before anything else, establish whether there was in fact an SBO, and from what date. A group that assumes a default and reports may be reporting incorrectly; a group that assumes none and does nothing may be compounding one.

The date matters because the penalty runs from when the obligation arose, and because the BEN-1 declaration will state when the individual became an SBO.

14.2 Obtain the BEN-1

This is the step that takes longest for a foreign group, because it requires an individual at the top of the structure to sign a declaration to an Indian company. Explain the Section 447 consequence of inaccuracy, provide the analysis so they can verify what they are signing, and give them time.

14.3 File, and consider voluntary adjudication

File BEN-2 as soon as the declaration is received. Then consider approaching the Registrar rather than waiting.

In the Contlo case the company recognised the default and voluntarily filed for adjudication; the ROC provided a personal hearing and considered submissions before imposing penalties. The penalty was not waived, but the process was orderly and the company controlled the timing.

The alternative is that the default is identified by the Registrar, or by a buyer’s counsel during diligence, at which point neither the timing nor the narrative is yours.

14.4 Fix the register and the control

Establish the BEN-3 register, and put in place the group-level notification instruction described in section 7. A remediation that does not install the control produces the same default again the next time the parent’s cap table moves.

14.5 Check what else the same analysis reveals

An SBO analysis done properly for the first time frequently surfaces two other things: a Press Note 3 exposure nobody had assessed, and an inconsistency between the ownership disclosed to the authorised dealer bank and the actual structure.

Deal with all three together. They rest on the same chart.

15. Twelve mistakes

Assuming the overseas parent’s disclosure is enough. An overseas holding company is not eligible for the holding reporting company exemption.
Using the 25% threshold. It was tightened to 10%.
Stopping the analysis at a company. Only individuals can be SBOs.
Testing only the shares limb and ignoring voting rights, distribution rights and influence.
Multiplying percentages down the chain and assuming that is how attribution works.
Ignoring the agreements. Influence must be exercised by agreement or written understanding, so that is where to look.
Concluding there is no SBO without documenting the analysis.
Not issuing BEN-4 where the chain cannot be traced.
Missing changes at parent level that alter the Indian company’s SBO position.
Treating BEN-1 as a formality. An inaccurate declaration engages Section 447.
Not maintaining the BEN-3 register even where BEN-2 has been filed.
Doing the SBO analysis and the Press Note 3 analysis separately, when they ask the same question.

16. Checklist

The analysis

Ownership chart drawn from the Indian company upward to natural persons at every branch
Percentages recorded at each level
Indirect holdings computed using the correct attribution mechanics for each entity type
All four limbs tested: shares, voting rights, distribution rights, significant influence
Every agreement conferring rights reviewed: shareholders’ agreements, investment agreements, board nomination and reserved matters
Trusts, funds, partnerships and HUFs in the chain analysed under the applicable rule
Exemptions assessed for each entity, rather than assumed
Conclusion documented and dated, including a negative conclusion

The filings

BEN-1 obtained from each identified SBO, with the date of receipt recorded
BEN-2 filed within 30 days of receiving each BEN-1
BEN-3 register established and kept current
BEN-4 notices issued where SBOs cannot be identified, with the process followed through
Signing director’s DSC confirmed valid before the 30 days begin
Professional certification arranged through your company secretarial provider

Ongoing

Standing instruction at group level to notify Indian compliance of any cap table change, new investor agreement or restructuring
Annual re-verification of the analysis against the current structure
BEN-3 register reviewed alongside the other statutory registers
SBO chart reused for Press Note 3, downstream investment and bank KYC rather than reproduced separately
Any historic default identified and voluntary adjudication considered

Not sure whether you have an SBO?

Most foreign-owned Indian companies have never done the analysis, and the ones that have usually stopped at the overseas parent. Send us your group structure chart and any shareholders’ agreements and we will tell you whether there is an SBO, what has to be filed, and whether there is a historic default worth regularising before someone else finds it.

17. Frequently asked questions

Q1. What is a Significant Beneficial Owner under Indian law?

An individual who ultimately owns or controls a company beyond the names on the register of members. Under Section 90 of the Companies Act, 2013 and the SBO Rules, 2018, it is an individual who holds indirectly, or indirectly together with direct holdings, at least 10% of shares, voting rights or distributable dividend, or who exercises significant influence or control other than through direct holdings alone.

Q2. Does our foreign parent’s disclosure satisfy the requirement?

No. The exemption for shares held by a holding reporting company applies where the member is itself an Indian reporting company subject to the same regime. An overseas holding company is not eligible for that exemption, so the Indian subsidiary must look through the overseas parent to the ultimate individuals and file BEN-2 accordingly.

Q3. What is the SBO threshold in India?

Ten per cent. It was originally 25% and has been tightened to 10% of shares, voting rights or the right to receive or participate in distributable dividend or other distribution. Any one limb is sufficient, and there is a separate qualitative limb for significant influence or control that requires no percentage at all.

Q4. Can a company or a trust be an SBO?

No. Only individuals can be SBOs. Companies, LLPs, trusts and firms are routes through which beneficial ownership is held, not owners themselves. The analysis continues up the chain until it reaches a natural person, or establishes that no natural person meets any of the tests.

Q5. Does a direct shareholding make someone an SBO?

Not by itself. Indirect holding is mandatory for SBO status — the definition captures an individual who holds indirectly, or indirectly together with direct holdings. A purely direct shareholder is already disclosed in the register of members, which is what the SBO regime is designed to look beyond.

Q6. What is significant influence for SBO purposes?

The power to participate directly or indirectly in the financial and operating policy decisions of the reporting company, but not control or joint control of those policies. It is a lower bar than control. Because a 10% holding is already a separate criterion, significant influence must be exercised through an agreement or written understanding, so the search focuses on shareholders’ agreements, board nomination rights and reserved matters.

Q7. What forms are involved and who files them?

BEN-1 is filed by the individual SBO with the company within 30 days of becoming an SBO. BEN-2 is filed by the company with the Registrar within 30 days of receiving BEN-1. BEN-3 is the register of SBOs maintained by the company. BEN-4 is a notice issued by the company to persons it suspects hold beneficial interests where it cannot identify its SBOs.

Q8. When is Form BEN-2 due?

Within 30 days of the company receiving the BEN-1 declaration from the significant beneficial owner. The clock runs from the date of receipt, which should be recorded. Where there is a change in SBO details, a fresh BEN-1 must be filed within 30 days of the change and an updated BEN-2 within 30 days of receiving it.

Q9. What is the penalty for not filing BEN-2?

Penalties of up to ₹10 lakh for the company and ₹1 lakh for the individual SBO, with continuing fines under Section 90(11). The company, the officers in default and the SBO are each assessed separately by the adjudicating authority, so it is not one amount shared between them.

Q10. Has this actually been enforced against foreign groups?

Yes. The Registrar penalised LinkedIn Technology Information Private Limited, its directors, and senior executives of its global holding company Microsoft Corporation, including CEO Satya Nadella and LinkedIn CEO Ryan Roslansky. The Registrar was willing to look up the chain and name individuals at the ultimate parent, and the size of the group provided no protection.

Q11. What happens if we file BEN-2 late?

Penalties still apply, but voluntary disclosure improves the position. In one case a company that delayed BEN-2 by 163 days recognised the default and voluntarily filed for adjudication; the ROC gave a personal hearing and imposed penalties of ₹1,81,500 on the company and ₹57,600 on each of two defaulting directors. Belated compliance is better than none.

Q12. Can shares be restricted for SBO non-compliance?

Yes. The Tribunal may restrict the shares in question, meaning no dividend payment, no voting rights and no transfer, effectively locking the non-compliant shareholder out until disclosure is made. For a foreign parent this is the consequence with real commercial bite, because it closes the dividend route and blocks any exit.

Q13. What if we give incorrect information in BEN-1?

Where a person wilfully furnishes false or incorrect information, or suppresses material information, in a Section 90 declaration, that person is liable to action for fraud under Section 447 of the Companies Act, 2013. That is a criminal provision carrying imprisonment, and it is a materially heavier exposure than the monetary penalty for a late filing.

Q14. What if we cannot identify our SBO?

Issue BEN-4 notices to persons the company suspects hold beneficial interests. This is the company’s discharge mechanism where a member will not co-operate or the chain cannot be traced, and where a satisfactory response is not received the company may apply to the Tribunal. A company that has issued notices and pursued the process is in a very different position from one that has done nothing.

Q15. Who is examined where a trust sits in the chain?

It depends on the type of trust. For a private trust the beneficiaries are considered; for a revocable trust the author; for a charitable trust the trustees. Where a trust is a member of the reporting company, the trustees, beneficiaries or author as applicable are responsible for filing BEN-1 with the company.

Q16. Do we have to file if there is no SBO?

No. BEN-2 is required only where the company has an identified SBO who has filed BEN-1. But the absence of a filing must rest on a documented analysis. Section 90 imposes a positive duty to take steps to identify SBOs, so “we concluded there is none” is defensible only if the chart, computations and agreement review exist.

Q17. Does a change at our overseas parent affect the Indian filing?

It can. A funding round that dilutes a founder below 10%, a secondary sale two levels up, a new shareholders’ agreement conferring board rights, or a restructuring inserting a new holding company can each change the Indian company’s SBO position. None of those events happens in India, so a standing instruction at group level to notify Indian compliance is the only reliable control.

Q18. How does this connect to Press Note 3?

Both regimes ask the same underlying question: who ultimately owns this. Press Note 3 requires the government approval route where an investor or beneficial owner is connected with a country sharing a land border with India, in any sector. A group that has done the SBO analysis has already produced most of what the FDI analysis needs, and doing them separately is duplicated work that usually surfaces at closing.