Cos can move NCLT to lift veil on hidden beneficial owners

Companies can approach the National Company Law Tribunal (NCLT) to force disclosures from an individual suspected of significant beneficial ownership, or 10% of a company, but hidden behind layers of legal entities, the ministry of corporate affairs (MCA) said.

- Gireesh Chandra Prasad

The onus of reporting the ultimate natural persons, or the true owners, lies with the companies following a legislative change in February 2019. This reporting requirement encompasses individuals with significant beneficial ownership and significant control through shareholding or other legal arrangements, including the right to receive dividends.

The ministry is nudging companies to be proactive in detecting and reporting to the authorities individuals who hold significant beneficial interests in them but remain anonymous by letting proxies collect dividends or attend general meetings.

“To enforce compliance with the (Companies) Act, the company can issue a notice... to any person whom they know or have reasonable cause to believe is a significant beneficial owner of the company...If the person refuses to respond, enforcement can be pursued through NCLT," the ministry said in its latest monthly update.