# Declaration of Beneficial Interest in Shares (Section 89)

## Two-Way Declaration Mechanism

### 1. By the Registered Holder

The registered holder (who does not hold beneficial interest) must file declaration to the company in Form MGT-4 within 30 days of entry of his name in the Register of Members.

### 2. By the Beneficial Owner

The person holding beneficial interest (but not registered) must declare to the company in Form MGT-5 within 30 days of acquiring such interest.

### 3. By the Company to ROC

The company must file declaration with the ROC in Form MGT-6 within 30 days of receipt of declaration from registered holder/beneficial owner.

## Change in Beneficial Interest

Any change in beneficial interest must be declared to the company within 30 days of such change.

## Consequences of Non-Declaration

Where a declaration is not made by the beneficial owner in MGT-5, no rights in respect of such shares are enforceable by him.

## Payment of Dividend

The company shall pay dividend only to the registered holder, NOT to the beneficial owner.

## Designation of Responsibility (Section 89(6))

For compliance, the company shall designate one of the following in Form MGT-6:

Company Secretary (CS), OR
Key Managerial Personnel (KMP) other than CS, OR
If no CS or KMP exists — every director.

Until a person is designated, the above persons shall be deemed to be designated.

Details of the designated person must be included in the Annual Return.
Any change must be intimated to ROC in Form GNL-2.

## Penalties

Default	Person Liable	Penalty
Failure to declare (MGT-4/MGT-5)	Defaulting person	₹50,000 + ₹200/day (Max ₹5 lakh)
Failure of company to file MGT-6	Company & every officer in default	₹1,000/day (Max ₹2 lakh)

## Non-Applicability of Section 89

Section 89 does NOT apply to:

1. Mutual funds.

2. Trusts created to set up:

Venture capital funds.
Other SEBI-regulated funds.

3. Government companies.

Worked example

### Example 1

Example 1: Mr. A holds 1,000 shares of PQR Ltd. as a registered holder, but the beneficial interest belongs to Mr. B. What declarations are required?

Answer:

Mr. A files MGT-4 with the company within 30 days of entry of his name.
Mr. B files MGT-5 with the company within 30 days of acquiring beneficial interest.
PQR Ltd. files MGT-6 with ROC within 30 days of receipt of declarations.

### Example 2

Example 2: Mr. B (beneficial owner) does not file MGT-5. Can he claim dividend or attend the AGM?

Answer: No. Since the declaration is not made, no rights are enforceable by Mr. B in respect of those shares. The company will pay dividend only to Mr. A (registered holder).

⚠️ Common exam mistakes

Confusing MGT-4 (registered holder), MGT-5 (beneficial owner), and MGT-6 (company to ROC).
Believing dividend can be paid to the beneficial owner — it is always paid to the registered holder.
Forgetting that Section 89 does not apply to mutual funds, SEBI trusts, and government companies.
Not realizing that failure to declare beneficial interest extinguishes enforceable rights over such shares.

Bare-Act text Section 89 read with Rule 9 of Companies (Management and Administration) Rules, 2014 · Companies Act, 2013 · click to expand

Section 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. (2) Every person who holds or acquires a beneficial interest in shares of a company shall make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company. (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 30 days from the date of receipt of declaration by it, a return in the prescribed form with the Registrar.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →