Beneficial Ownership: The Ministry of Corporate Affairs (MCA) issued a notification on October 27, 2023, revising the Companies (Management and Administration) Rules, 2014 to introduce new requirements for designating a responsible individual, termed the “Designated Person,” for disclosing beneficial interests in shares within the annual return (Form MGT-7). This rule aims to enhance transparency and compliance with beneficial ownership regulations across all types of companies.
Beneficial Ownership Related Key Highlights of the Amendment
- Designated Person Requirement: Every company must now appoint a Designated Person responsible for coordinating with the Registrar of Companies (RoC) on beneficial interest declarations. This person’s role includes providing and maintaining accurate information on individuals who hold a beneficial interest in the company’s shares.
- Who Can Be Appointed:
* Priority Order: If a company has a company secretary (CS) or other Key Managerial Personnel (KMP), they may be appointed as the Designated Person.
* Alternate Choices: If there is no CS or KMP, any director can assume this role.
* Deemed Designation: If no formal designation occurs, the company’s CS, managing director, or manager (if present) will automatically be considered the Designated Person. If none of these roles exist, each director is regarded as the Designated Person by default. - Annual Return Disclosure: The name and details of the Designated Person must be reported in the company’s annual return (MGT-7). Furthermore, if the Designated Person changes within a financial year, the company is required to inform the RoC by filing e-Form GNL-2.
- Objective and Compliance Impact: This amendment aligns with global standards on beneficial ownership transparency, which aim to prevent misuse of corporate entities for money laundering or tax evasion. All companies, including private, public, and unlisted entities, are required to adhere to this rule to enhance transparency in ownership structures and ensure accurate reporting to regulatory authorities.
- Implementation Date: These changes came into effect immediately upon notification on October 27, 2023, giving companies little transition time. Consequently, entities are urged to promptly identify and designate a responsible person in compliance with this amendment.
This amendment underscores transparency in corporate ownership and aligns with international anti-money laundering efforts. Companies are advised to review their internal structures and ensure that the designated person’s role is clearly defined and accurately documented in the annual return filing process.
©CS SHIKHA PUBBI
Practicing Company Secretary
Shikha Pubbi & Associates (SPCS)
https://spcsfirm.in/
Disclaimer: While the information presented in this article is based on factual sources, the interpretation and opinions expressed are solely those of the author.
Sources:
- MCA Notification dated Oct 27, 2023
- Official Gazette
