Significant beneficial owners in Indian corporates might face strict action for inadequate or wrong disclosures about their ownership and companies too can seek action against entities in case they fail to provide satisfactory responses, according to rules. With the corporate affairs ministry amending the rules for significant beneficial owners under the Companies Act, 2013, corporates are required to take necessary steps to identify such owners and obtain a declaration from them.
Apart from providing more clearer definitions for determining whether an individual or an entity has significant beneficial ownership, corporates would be required to provide the details in a more elaborate manner to the ministry. Significant beneficial owners, who fail to make a declaration regarding their ownership, could face fine, imprisonment or both under the Companies Act. In instances, where such entities have willfully provided incorrect information, then such acts would be considered as fraud under the Act.
Similarly, companies that fail to maintain registers of significant beneficial owners would also face action, as per the rules. Leading consultancy Deloitte said the spirit of the amendment rules is to bring in more clarity and is in alignment with the government's drive to inculcate transparency and accountability in the corporate set up.