Delay in Beneficial Ownership Disclosure: MCA Penalises Company and Directors u/s 89(7) of Companies Act [Read Order]

The Ministry of Corporate Affairs (MCA) has penalized a Private Limited company and its directors for a delay in filing beneficial ownership disclosures as mandated under Section 89 of Companies Act, 2013.

The proceedings were initiated under Section 454 of the Act following a violation of Section 89(6). This rule mandates that a company must file Form MGT-6 within 30 days of receiving a declaration of beneficial interest in its shares.

In this instance, the company received the necessary declaration from the beneficial owner, Allianz Infrastructure Luxembourg II SARL, on March 14, 2024. However, they only managed to file the required e-form on April 18, 2024, crossing the legally prescribed timeline.

In its application to the adjudicating authority, the company admitted to the delay but argued that it was an unintentional delay rather than a deliberate act. Requesting leniency, the company pointed out that the filing had already been completed and the necessary additional late fees had been paid.

The ROC continued with the imposition of a fine rejecting the defence of the company. It noted that as per the act, failing to file within the prescribed timeline triggers a penalty of ₹1,000 for each day the default continues, subject to a maximum cap.

After calculating the precise period of the delay, the registrar imposed a fine of ₹4,000 on the company, as well as on each of its three directors. The authority also clarified that the directors must pay these fines from their personal funds.

Core Provisions of Section 89 of Companies Act

S. 89 (1): Where the name of a person is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares, such person shall make a declaration within such time and in such form as may be prescribed to the company specifying the name and other particulars of the person who holds the beneficial interest in such shares.

S. 89(6): Where any declaration under this section is made to a company, the company shall make a note of such declaration in the register concerned and shall file, within thirty days from the date of receipt of declaration by it, a return in the prescribed form with the Registrar in respect of such declaration with such fees or additional fees as may be prescribed.

S. 89(7): If a company, required to file a return under sub-section (6), fails to do so before the expiry of the time specified therein, the company and every officer of the company who is in default shall be liable to a penalty of one thousand rupees for each day during which such failure continues, subject to a maximum of five lakh rupees in the case of a company and two lakh rupees in case of an officer who is in default.

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