In the early days of compliance work, I often saw a familiar pattern — companies that looked perfectly clean on paper, but where the real power rested somewhere else. Shadow promoters. Layered shareholding. Family control routed through relatives or foreign entities. Legally structured, yes — but far from transparent.
That’s exactly what Section 90 of the Companies Act, 2013 aims to fix. It forces companies to identify who actually controls or benefits from ownership, not just whose name appears on the share certificate. By mandating disclosure of Significant Beneficial Owners (SBOs), the law makes sure that control can no longer stay invisible.
This section isn’t just technical compliance. It’s about accountability, trust, and clean corporate governance.
What Is Section 90 of the Companies Act, 2013?
Section 90 mandates companies to maintain a Register of Significant Beneficial Owners (SBOs) to enhance corporate transparency.
In simple terms, the law asks one powerful question:
Who ultimately owns or controls this company?
If the answer is different from what the shareholding pattern shows, disclosure becomes compulsory.
Who Is a Significant Beneficial Owner (SBO)?
An SBO is an individual who ultimately holds beneficial interest in a company — even if that interest is indirect or exercised through other entities.
Key point to remember
- Only individuals can be SBOs.
- Companies, LLPs, trusts, or firms are only routes, not SBOs themselves.
How Section 90 Identifies an SBO
Section 90 provides both quantitative and qualitative tests for identification of an SBO. This is where most confusion happens.
Quantitative tests (numerical thresholds)
An individual is an SBO if they hold indirectly:
- 10% or more shares, or
- 10% or more voting rights, or
- 10% or more dividend rights,
through one or more entities including companies, LLPs, partnerships, or trusts.
Earlier, the threshold was 25%. It has now been tightened to 10%.
Qualitative test (control without numbers)
Even if the percentage is below 10%, a person can still be an SBO if they:
- Exercise significant influence, or
- Have actual control over decisions, or
- Can influence the composition of the board.
I’ve personally seen cases where influence mattered more than shareholding — especially in promoter-managed or family businesses.
Disclosure Obligations Under Section 90
Significant beneficial owners must declare their interest — this is not optional.
Obligations of the SBO
Under Section 90 of the Companies Act, 2013, every significant beneficial owner is required to disclose the nature of his interest and other particulars to the company.
- Disclosure must be filed in Form BEN-1
- Timeline: within 30 days of acquiring SBI status or change in interest
Obligations of the company
The company must:
- File Form BEN-2 with the ROC
- Maintain a Register of SBOs (Form BEN-3)
- Take proactive steps to identify SBOs
- Issue notices if ownership looks suspicious or unclear
This puts responsibility on both sides — not just the individual.
Why the Register of SBOs Matters
The Register of Significant Beneficial Owners is not a formality.
It:
- Makes ownership traceable
- Helps regulators detect money laundering
- Prevents misuse of shell structures
- Protects investors and lenders
Banks, regulators, auditors, and even investors increasingly ask for SBO clarity before moving forward.
What Happens If SBO Disclosure Is Ignored?
Section 90 has serious teeth.
Penalties on SBO
- Fine ranging from ₹1 lakh to ₹10 lakh
- Additional ₹1,000 per day for continuing default
Penalties on company & officers
- Company, directors, and KMPs can all be penalised
- ROC can restrict rights on shares
- Voting rights, dividend rights, and transferability can be frozen
I’ve seen transactions stall simply because BEN filings weren’t complied with. The cost of delay often exceeds the penalty itself.
Complex Structures: Trusts, LLPs & Foreign Entities
Section 90 applies even when ownership flows through:
- Trusts (discretionary or beneficiary-based)
- Layered Indian companies
- Foreign entities
The test is not geography — it’s ultimate individual control.
This makes Section 90 one of the most powerful anti-evasion provisions in corporate law.
Common Misunderstandings Around Section 90
- “My name isn’t on the shareholding, so I’m safe” ❌
- “The holding company should disclose, not me” ❌
- “Family shareholding doesn’t count” ❌
The law looks through structures — not at them.
Practical Tips for Companies and Promoters
- Review shareholding annually
- Identify indirect holdings clearly
- Don’t rely on assumptions — document control
- File disclosures even if doubt exists
- Keep the SBO register updated
Transparency today prevents litigation tomorrow.
Why Section 90 Strengthens Corporate India
By enforcing real visibility of ownership, Section 90:
- Builds global trust
- Aligns India with international governance standards
- Discourages benami and shadow control
- Encourages ethical business practices
Clean structures attract serious investors. Hidden ones don’t.
Conclusion
Section 90 of the Companies Act, 2013 sends a clear message — control can no longer hide behind structures. Companies must know who truly owns them, and individuals with real influence must step forward.
If you’re a promoter, director, or compliance officer, treating SBO disclosure as a routine formality is a serious mistake. This section is becoming one of the most actively enforced governance tools.
👉 If you need help identifying SBOs, filing BEN forms, or reviewing complex ownership structures, visit callmyca.com for clear, expert support that keeps you compliant and confident.
