MCA notifies Rules for Significant Beneficial Owners & their Declaration to reporting LLPs

On 9-11-2023, the Ministry of Corporate Affairs notified the Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023 mandating every Limited Liability Partnership (‘LLP’) to find out if any of the individuals is a significant beneficial owner in relation to reporting LLP and on identification, such individual has to make a declaration. The provisions came into force on 9-11-2023.

Key Points:

1. The definition of Significant Beneficial Owner (‘SBO’) has been laid down as follows:

   “a reporting limited liability partnership, means an individual who acting alone or together or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting limited liability partnership, namely:-

   (i) holds indirectly or together with any direct holdings, not less than ten per cent of the contribution;

   (ii) holds indirectly or together with any direct holdings, not less than ten percent of voting rights in respect of the management or policy decisions in such limited liability partnership;

   (iii) has right to receive or participate in not less than ten per cent of the total distributable profits, or any other distribution, in a financial year through indirect holdings alone or together with any direct holdings;

   (iv) has right to exercise or actually exercises, significant influence or control, in any manner other than through direct-holdings alone”.

2. Duties of reporting LLP:

   • To find out if there is any individual who is an SBO, in relation to that reporting limited liability partnership, and if so, identify him and cause such individual to make a declaration in Form No. LLP BEN-1.

   • In case where it is partner instead of an individual and holds not less than 10% of its contributions/ voting rights/ right to receive or participate in the distributable profits or any other distribution payable, the reporting LLP will have to give notice to such partner in Form LLP BEN-4.

3. Declaration of SBO:

   • Declaration to be made in Form No. LLP BEN-1 to reporting LLP within 90 days from commencement on these rules.

   • An individual who subsequently becomes a SBO or his SBO undergoes any change then declaration has to be made within 30 days of acquiring such SBO or any change.

4. Return of SBO in contribution: after receiving the declaration, the reporting LLP will have to file a return in Form No. LLP BEN-2 with the Registrar within 30 days from the receipt of such declaration.

5. Register of SBO:

   • To be maintained by LLP of SBO in Form No. LLP BEN-3;

   • The Register should be open for inspection-

     • During business hours;

     • For not less than 2 hours;

     • With a fee not exceeding Rs. 50 for each inspection

6. Notice seeking information about SBO to be made in the Form No. LLP BEN-4.

7. Application to the Tribunal: can be made in following cases:

   • where any person fails to give the information required by the notice in Form No. LLP BEN-4

   • where the information given is not satisfactory

8. Non- applicability: LLP held by

   • Central government/ State Government/ Local Authority;

   • Reporting LLP/ body corporate/ entity controlled by Central or State Governments;

   • An investment vehicle registered and regulated by the Securities and Exchange Board of India;

   • an investment vehicle regulated by the Reserve Bank of India, or the Insurance Regulatory and Development Authority of India, or the Pension Fund Regulatory and Development Authority.