Sbo declaration in form mgt-7

Dear Jayanta,

After giving a thorough review of your query, I understand your concern regarding the applicability of the SBO declaration as per the MGT-7 or BEN forms for an unlisted public company, where most of the investments are done through a proprietary firm and an LLP. I would like to provide you with some pieces of advice that might help you to understand the concept in a better manner.

As per Section 90 of the Companies Act, of 2013, if any individual is there who is holding direct SBO (Significant Beneficial Ownership) of at least 10% in any reporting company through an entity like LLP in this case, he must declare it in Form BEN-1 and the company must file BEN-2 with the registrar.

In your case, since the individual is holding 99% of the LLP, then he must require an SBO Declaration for the investment in the unlisted public company.

In the case of a proprietary firm, its legal identity is combined with that of its owner. Therefore, if the proprietary firm owns 10% or more of the shares in an unlisted public company, the individual is already recognized as a registered shareholder and does not need to submit an SBO declaration.

I would like to say that SBO rules are also not limited to the ratio of the holdings whether they are direct or not but considering the control and influence over the reporting company would be a great idea.

Referring to the case of ArcelorMittal India Pvt. Ltd. v. Satish Kumar Gupta (2018) can be considered beneficial as this case tends to underscore the importance of lifting the corporate veil for determining ownership and control.

At last, I would suggest that for the LLP’s investment, an SBO declaration is majorly required.

I hope I was able to help you with the query. Should you require any further assistance, please feel free to connect with me on LinkedIn. (www.linkedin.com/in/pankhuri-rastogi-9221b2289)

Thank You.  

If the proprietary firm and LLP, where you hold 100% and 99% ownership respectively, together invest in an unlisted public company and your combined holding exceeds 10%, you qualify as the Significant Beneficial Owner (SBO). In this case, you need to file Form BEN-1 to disclose your beneficial ownership to the company, and the company must file Form BEN-2 with the Registrar of Companies. Additionally, this information should be reflected in the company’s annual return (Form MGT-7) to ensure compliance. Since the structure indicates a "one-man show," accurate SBO disclosure is essential to avoid any regulatory issues. Consulting a professional for proper filing would be wise.