What are the objectives of Section 89 of the companies act?

Answer 1

The fact that who shall be the “beneficial owner” was clear from the time Section 89 was enacted, i.e. 1st April 2014, the “beneficial owner” will be the person in which “beneficial interest” is vested. Still, there was a lot of ambiguity as to what amounts to “beneficial interest” and on what grounds we can say that the “beneficial interest” lies with a person, not a person whose name is registered in the Register of Members. Companies (Amendment) Act, 2017 added a new sub-section (10) to Section 89 to define “beneficial interest” with effect from June 13, 2018. Section 90 was also substituted for SBO identification.

Objectives-

Section 89 has an objective to check where does the “beneficial interest” lies, irrespective of the quantum of “beneficial interest”, if any person whose name is registered in respect of particular shares doesn’t have any beneficial interest in those shares shall declare to Company in MGT-4 and person who has been vested with such beneficial interest declare in MGT-5 and subsequently, the Company shall file e-Form MGT-6 to RoC.

It may not be necessary every time the firm obtains a declaration of MGT-4 & MGT-5, since the registered owner may sometimes hold shares for the benefit of another person for shares registered in his name. If the beneficial interest is not held by the registered owner, Section 89 requires disclosure.

Section 89 has been harmonized in a manner that if any individual having “beneficial interest” in any shares not registered in his name and has declared in Form MGT-5 to the Reporting Company shall be treated to have rights or entitlements in the shares “DIRECTLY”.