Section 89 under Companies Act 2013 Archives

All you need to know about Section 89 under Companies Act, 2013 Introduction Section 89 of the Companies Act, 2013 introduces a vital system for the declaration of beneficial interest in shares within a company. This provision establishes a procedure that enables individuals or entities to obtain complete control over a company. In this article, we will delve into the procedure to apply for Section 89, benefits of Section 89 and the provisions under Section 89. Overview of Section 89 of Companies Act, 2013 Under the Companies Act, 2013, Section 89 addresses a crucial requirement of declaring beneficial interests in shares. This provision not only ensures transparency and accountability but also safeguards the interests of stakeholders within a company. By mandating the declaration of such interests, Section 89 enables companies to maintain an accurate record of share ownership. Provisions under Section 89 of the Companies Act, 2013 Every person who holds or acquires a beneficial interest in shares of a company must submit a declaration to the company, clearly specifying the nature of their interest. The declaration must be made using Form No. MGT-4 within 30 days from the date of acquiring the beneficial interest. The company is obligated to maintain a register of these declarations in Form No. MGT-6. The register must be accessible for inspection by any member of the company, free of charge. What are the Benefits of Section 89? There are some benefits of Section 89 of the Companies Act, 2013. The benefits includes-: Enhanced Transparency: Section 89 promotes transparency within companies by mandating the declaration of beneficial interests in shares. This enables stakeholders to have a clear understanding of the ownership structure and potential conflicts of interest. Shareholder Protection: The provisions under section 89 acts as a protective measure for shareholders by ensuring that any person or entity with a beneficial interest in shares is accountable and subject to scrutiny. This helps prevent fraudulent activities and unfair practices. Effective Corporate Governance: Section 89 strengthens the system of corporate governance by providing a procedure for companies to maintain accurate records of share ownership. This contributes to the overall integrity and credibility of the company's governance structure. What is the applicability of Section 89? Section 89 is applicable to all companies incorporated under the Companies Act, 2013. Any individual or entity that holds or acquires a beneficial interest in shares of a company is required to submit a declaration. What are the exemptions under Section 89? Certain entities are exempted from the obligation to submit a declaration under Section 89. These include: Depositories or participants in a depository system. Stock exchanges, clearing corporations, or central depositories. Registered foreign institutional investors or foreign portfolio investors. Registered venture capital funds or foreign venture capital investors. Registered alternative investment funds or foreign alternative investment funds. What is the procedure to apply for Section 89? The step-by-step procedure to apply for Section 89 is listed below-: Obtain Form No. MGT-4: Acquire the prescribed Form No. MGT-4, as specified under the Companies Act, 2013. This form will be used to make the declaration of beneficial interest in shares. Complete the Declaration: Fill out the Form No. MGT-4 accurately and provide all necessary details as required. Specify the nature of the beneficial interest in shares being held or acquired. Timely Submission: Ensure that the completed declaration is submitted to the company within 30 days from the date of acquiring the beneficial interest. Adhering to this timeline is crucial to meet the statutory requirement. Register Maintenance: The company is responsible for maintaining a register of these declarations in Form No. MGT-6. This register should contain accurate and up-to-date information regarding the beneficial interests in shares. Inspection Accessibility: Make the register of declarations, maintained in Form No. MGT-6, open for inspection by any member of the company. Ensure that the register is accessible without any charge to allow shareholders to exercise their right to verify the ownership structure. Compliance with Form and Format: Ensure that the declaration is made in the prescribed form, adhering to the specified format and guidelines provided by the Companies Act, 2013. This will help ensure compliance with the regulatory requirements. Maintain Records: Keep a copy of the submitted declaration, along with any supporting documents, for record-keeping purposes. This will help demonstrate compliance and facilitate future reference if needed. Regularly Review and Update: Continuously monitor and review the beneficial interests in shares held or acquired. Whenever there are changes or new acquisitions, promptly update the declaration and submit it to the company within the stipulated timeframe. Conclusion Section 89 of the Companies Act, 2013 plays an important role in regulating the declaration of beneficial interest in a company's shares. Individuals or entities holding or acquiring such an interest are required to submit a declaration, employing Form No. MGT-4 within 30 days of acquisition. The company is responsible for maintaining a register of these declarations using Form No. MGT-6, which is accessible for inspection by any member of the company, without incurring any charges. 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