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    SBO Rule

    Posted By : CS Shiriti / Published on : 26-Aug-2019 05:58 AM / View : 270 / Comment : 0

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    There are two preference shareholders X and Y respectively in Company Z.

    Both the above shareholders are holding 4% Cumulative Redeemable Preference shares in Company Z. As on date, no dividend is paid to any of these shareholders in any of the years by Company Z and thereby attracts views mentioned on point no.14 of FAQs on SBO Rules by Shri Vinod Kothari. PFA the same.

    However, Rule 2 of Companies (Significant Beneficial Owners) Amendment Rules, 2019 states instruments in the form of GDR, Compulsorily Convertible Preference shares or Compulsorily Convertible debentures shall be treated as shares and thereby attracts views mentioned on point no.15 of FAQs on SBO Rules by Shri Vinod Kothari. As such, while determining SBOs, Cumulative redeemable preference shareholders shall not be counted.

    Also, duties of reporting company are mentioned in Rule 2A of Companies (Significant Beneficial Owners) Amendment Rules, 2019 which states as under :

    every reporting company shall in all cases where its member (other than an individual), holds not less than ten per cent of its;-

    (a) shares, or

    (b) voting rights, or

    (c) right to receive or participate in the dividend or any other distribution payablc in a financial year,

    give notice to such member, seeking information in accordance with subsection (5) of section 90, in Form No. BEN-4.]


    Now, considering all the points together, whether a notice in FORM NO. BEN-4 should be addressed to all the preference shareholders of Company Z asking them to address declaration in FORM NO. BEN-1 or not OR we should go by the definition of shares which includes CCPs and not Cumulative Redeemable Preference shares and hence not counted while determining SBO.
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