An individual who, acting alone or together with persons resident outside India or through one or more trusts, possesses any one or more of the following rights or entitlements in a reporting company.
### Threshold Criteria
An individual is an SBO if they (directly or indirectly):
1. Hold not less than 10% of the shares, OR
2. Hold not less than 10% of the voting rights (VR) in shares, OR
3. Have the right to receive or participate in not less than 10% of the total distributable dividend (or any other distribution) in a financial year.
## Key Points to Remember
The SBO is always an individual (a natural person), never a body corporate.
Both direct and indirect holdings are considered.
The threshold is 10% for shares, voting rights, and dividend rights.
Indirect holding includes holding through other entities (e.g., body corporate, HUF, partnership firm, trust).
## Purpose
Section 90 aims to identify the ultimate human beneficiary behind layered corporate structures, thereby promoting transparency and combating money laundering and benami transactions.
Worked example
### Example 1
Example 1: Mr. X holds 12% equity shares in ABC Ltd. directly. Is he an SBO?
Answer: Yes. Since Mr. X holds not less than 10% of shares (he holds 12%), he qualifies as a Significant Beneficial Owner under Section 90, and must make the prescribed declaration to the company.
### Example 2
Example 2: Mr. Y holds 8% directly and another 4% through a body corporate in DEF Ltd. Is he an SBO?
Answer: Yes. The total direct + indirect holding is 12%, which exceeds the 10% threshold. Mr. Y is an SBO.
⚠️ Common exam mistakes
Believing a company or body corporate can be an SBO — only an individual qualifies.
Considering only direct holdings — indirect holdings (through entities/trusts) must also be aggregated.
Confusing the 10% SBO threshold (under SBO Rules) with the 25% threshold mentioned in the bare Section 90.
Bare-Act text Section 90 · Companies Act, 2013 read with Companies (Significant Beneficial Owners) Rules, 2018 · click to expand
Section 90(1): Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than 25% or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control over the company, shall make a declaration to the company, specifying the nature of his interest and other particulars, in such manner and within such period of acquisition of the beneficial interest or rights and any change thereof, as may be prescribed.