Significant beneficial ownership rules to help identify entities controlled from overseas

The new rules on significant beneficial ownership have put in place a clear regulatory framework that would help identify entities which might be controlled from outside the country, according to the corporate affairs ministry.

Amid continuing efforts to curb illicit fund flows, the ministry in February amended the significant beneficial ownership rules under the companies law.

Corporate Affairs Secretary Injeti Srinivas has said the new rules provide more clear definitions for determining whether an individual or an entity has significant beneficial ownership and all forms of control that could be exercised in the affairs of a company are being captured.

"The new SBO (Significant Beneficial Ownership) rules put in place a clear regulatory framework that would also help identify entities that might be controlled from outside the country," he said in a message in the ministry's newsletter for the month of February.

Under the new norms, the whole principle of proportional calculation has been done away with and provisions are in place to identify significant beneficial owners under various circumstances.

"The changes to the rules will supplement the government's continuing efforts to clamp down on corporate entities suspected to be used as conduits for illicit fund flows," Srinivas said in the newsletter posted on the ministry's website.

Besides, the secretary said the ministry has notified the Specified Companies (furnishing of information about payment to micro and small enterprise suppliers) order.

The order, which seeks to address the concerns of small businesses over delayed payments, makes it mandatory for all companies to file half-yearly returns detailing outstanding dues to MSME suppliers. The companies also have to assign reasons in case the delay is for more than 45 days.

"Directors of companies delaying payment for supplies made by MSME may have to face imprisonment up to 6 months or pay fines between Rs 25,000 and Rs 3,00,000," Srinivas said.