Query regarding SBO_ Form BEN - 2

[Deeksha Nagal]

Dear Professionals,

I have a query regarding SBO compliance.

Earlier, the company filed Form BEN-2 based on the SBO declaration. Now, the registered shareholder (HUF) has transferred all its shares to another individual, and the HUF has ceased to be a member.

In this case, is it required to file Form BEN-2 ?

[CA SARIKA JAIN]

Based on the facts stated, filing of Form BEN-2 is not automatically required merely because the HUF (registered shareholder) has transferred its shares to another individual.

The requirement depends on whether there is any change in the Significant Beneficial Owner (SBO) or in the SBO particulars.

Analysis

• Earlier:

  • Registered shareholder: HUF

  • The company received Form BEN-1 from the SBO and accordingly filed Form BEN-2.

• Now:

  • The HUF has transferred all its shares to another individual.

  • The HUF has ceased to be a member.

Whether BEN-2 is required?

Scenario 1 – The earlier SBO has ceased to be an SBO (or there is a change in SBO)

• Yes. The individual whose SBO status has changed or ceased should submit a fresh/revised BEN-1 to the company.

• Upon receipt of such declaration, the company is required to file BEN-2 with the ROC within 30 days. Section 90 and Rule 4 require the company to report changes in significant beneficial ownership. 

Scenario 2 – The new individual is now the registered shareholder and also the beneficial owner in his own right

• In this case, there may not be any SBO reporting requirement if there is no indirect holding and the individual does not qualify as an SBO under the SBO Rules.

• Consequently, no fresh BEN-1 and hence no BEN-2 would be required merely because the registered shareholder changed. 

Practical conclusion

The key question is what has happened to the beneficial ownership, not merely the registered ownership.

• ✅ If the share transfer results in cessation/change of the existing SBO, obtain a revised BEN-1 and file BEN-2.

• ✅ If the transferee becomes the registered owner and beneficial owner directly, with no SBO relationship, then BEN-2 is generally not required solely because of the transfer.

If you can clarify:

1. Who was the SBO earlier? (Karta of the HUF or another individual?)

2. Who is the transferee? (The same individual who was the SBO, or a different person?)

3. Does the transferee hold the shares in his own name as beneficial owner, or on behalf of someone else?

I can give a definitive answer for your exact case.

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[Deeksha Nagal]

1. Details regarding Significant Beneficial Ownership (SBO):

1. 1. Who was the SBO earlier?
      

1. 1. The Significant Beneficial Owner (SBO) earlier was the Karta of the HUF.
   2. Who is the transferee?
      The transferee is a coparcener of the same HUF. He is a different individual from the earlier SBO.

   3. Does the transferee hold the shares in his own name as the beneficial owner, or on behalf of someone else?
      The transferee holds the shares in his own name as the beneficial owner. He is already an existing shareholder of the company in his individual capacity.

      Further, the transferee is also the Karta of his own HUF, and that HUF is also a shareholder of the company. The company has already received the relevant declarations and filed Form BEN-2 in respect of the SBO relating to that HUF.

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[Prahalad Kumar]

Dear Professionals,

In simple terms, Form BEN-2 is required only if the transfer results in the individual becoming a Significant Beneficial Owner (SBO) or if there is a change in the position of the existing SBO.

If neither of these conditions is met, filing Form BEN-2 is not required.

Best regards,
Prahalad Kumar

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