Declaration of Beneficial Interest in Shares - Rule 9 Procedure & Penalty (Section 89)

# Declaration of Beneficial Interest in Shares (Section 89 read with Rule 9)

## Background

Section 89 of the Companies Act, 2013 deals with situations where the registered holder of shares (whose name appears in the Register of Members) is different from the beneficial owner (the person who enjoys economic benefits of the shares). The law requires both parties to disclose this divergence so that the company and the regulator know who really owns the shares.

## Rule 9 — Procedure for Declaration

### 1. Declaration by Registered Owner (not the beneficial holder)

• A person whose name is entered in the Register of Members but who does not hold the beneficial interest must file a declaration with the company.
• Form: MGT-4
• Timeline: Within 30 days from entry of name in Register of Members.
• Exception: For an unlisted public company and a private company licensed to operate from the IFSC, the timeline is 60 days instead of 30 days.

### 2. Change in Beneficial Interest

• Any change in beneficial interest must be intimated to the company within 30 days in Form MGT-4.

### 3. Declaration by Beneficial Owner

• Every person acquiring or holding beneficial interest in shares not registered in his name must file a declaration in Form MGT-5 within 30 days of acquiring such beneficial interest.

### 4. Company's Duty on Receipt of Declaration

• The company shall:
• Make a note of the declaration in the Register of Members;
• File a return in Form MGT-6 with the Registrar of Companies (ROC) within 30 days of receipt of declaration, along with required fee.

## Exemption to Government Company

Section 89 shall not apply to a Government Company provided it has not committed default in filing:

• Financial statements under Section 137, or
• Annual return under Section 92.

## Penalty under Section 89

### (A) Persons required to make declaration but fail to do so

• Fine: Up to ₹50,000
• Continuing default: Additional ₹200 per day
• Maximum: ₹5,00,000

### (B) Company failing to comply

• Company and every officer in default: Penalty of ₹1,000 per day during which the failure continues.
• Maximum penalty:
• ₹5,00,000 for the company
• ₹2,00,000 for officer in default

## Quick Recap — Forms Map