Lok Sabha Question No. 944 (UNSTARRED), answered on 2024-07-29
Subject: Compliance Standards for Global Tech Companies
Ministry: CORPORATE AFFAIRS
Asked by: Thiru Dayanidhi Maran, Thiru Dayanidhi Maran

## GOVERNMENT OF INDIA MINISTRY OF CORPORATE AFFAIRS

## LOK SABHA UN-STARRED QUESTION NO. 944

Answered on Monday, July 29, 2024 7 Shravan, 1946 (Saka)

## COMPLIANCE STANDARDS FOR GLOBAL TECH COMPANIES

## QUESTION

## 944. THIRU DAYANIDHI MARAN:

Will the Minister of CORPORATE AFFAIRS be pleased to state:

- (a) the measures taken by the Government to ensure that global tech companies adhere to compliance requirements related to the identification of significant beneficial owners;
- (b)  whether  the  Government  conducts  regular  audits  or  reviews  to check compliance with the SBO norms;
- (c)  whether  the  Government  intend  to  send  message  to  other corporations and their officers regarding compliance with SBO norms through the recent imposition of fines on Microsoft and Linkedin;
- (d) whether the Government plans to enhance corporate governance and compliance standards among companies operating in India;
- (e) if so, the details thereof and the framework of the plans to introduce additional guidelines
- or regulations to prevent similar violations in the future; and (f)  whether  the  Government  has  any  broader  implications  for  other companies with similar corporate structures or ownership patterns in light of this enforcement action, if so, the details thereof?

## ANSWER

Minister of State in the Ministry of Corporate Affairs; Minister of State in the Ministry of Road Transport and Highways

(Shri Harsh Malhotra)

(a) to  (f):       Section 90 of the Companies Act, 2013 provides for requirements  in  respect  of  disclosure  about  significant  beneficiary ownership. These  provisions are applicable to all  companies irrespective  of  any  sector  or  area.      Detailed  procedure  has  been prescribed through Companies (Significant Beneficial Owners) Rules, 2018.

Companies (Significant Beneficial Owners) Rules, 2018 (SBO Rules) have been notified for giving effect to the provisions of section 90(1) of  the  Companies  Act,  2013.      SBO  Rules  make  it  mandatory  for individuals and companies to make declaration on beneficial ownership information.  The rule inter alia states that the significant beneficial  owner  as  an  individual  who  acting  alone  or  together,  or through one or more persons or trust, holds indirectly, or together with any direct holdings, not less than ten percent of the shares or voting rights in the shares or right to receive not less than ten percent of the dividend or exercises, significant influence or control in any manner other than direct holdings.

An  individual  having  or  acquiring  beneficial  interest  by  way  of significant influence or control (as defined under Companies Act, 2013) in a company shall declare the same to the company in Form BEN-1. The company has to report the same to the Registrar of Companies in e-Form BEN-2.  In the event of non-compliance, it is an adjudicable offence.   Section 90 of the Companies Act, 2013 has also been made applicable to the LLPs  vide notification dated 11.02.2022 and accordingly LLP (Significant Beneficial Owners) Rules, 2023 has been notified on 09.11.2023.

Similarly, the provisions of the AML-CTF & KYC Guidelines issued by the International Financial Services Centres Authority (IFSCA) in 2022 inter-alia  includes  provisions  related  to  identification  of  Beneficial Owner, apply to the Regulated Entities (Res) licensed, recognized or registered,  authorized  by  IFSCA.    All  REs  in  IFSC  are  mandated  to ensure  compliance  of  the  provisions  related  to  identification  of Beneficial Owner(s) as specified in the AML-CTF& KYC Guidelines.

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 specify the corporate governance and disclosure norms to be complied by the entities listed on the recognised stock exchanges in India.   The said regulations are amended from time to time, in order to keep pace with the evolving dynamics of the capital market in India.

Further the Income-tax Act, 1961, Section 139 provides that 'beneficial Owner' in respect of an asset means an individual who has provided,  directly  or  indirectly,  consideration  for  the  asset  for  the immediate or future benefit, direct or indirect, of himself or any other person.    Further,  the  said  section  provides  that  a  person,  being  a resident other than not ordinarily resident in India within the meaning of clause (6) of section 6 of the Income-tax Act, 1961, who at any time during the previous year, holds as a beneficial owner or otherwise, any asset (including any financial interest in any entity) located outside India or has signing authority in any account located outside India; or a  beneficiary  of  any  asset  (including  any  financial  interest  in  any entity) located outside India, shall furnish, on or before the due date, a  return  in  respect  of  his  income  or  loss  for  the  previous  year.

Further also, the said section also prescribes that in the income tax Return forms, assessee  shall furnish the particulars of income exempt from tax and assets of the prescribed nature and value, held by them as a beneficial owner or otherwise or in which they are a beneficiary, their  bank  account  details  and  credit  cards  held.      In  the  case  of companies, details of persons who are beneficial owners of shareholding not less than 10% of the voting power at any time is also required to be furnished. Furthermore, sub-section (4) of the section 94A of the Income-tax Act, 1961  provides  that  where,  in  any  previous  year,  the  assessee  has received or credited any sum from any person located in a notified jurisdictional area and the assessee does not offer any explanation about the source  of the said sum in the hands of such person or in the hands  of  the  beneficial  owner  (if  such  person  is  not  the  beneficial owner of the said sum) or the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory, then, such sum shall be deemed to be the income of the assessee for that previous year.

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