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New definitions under the Companies Amendment Act, 2017 January, 2018

With the rising concerns over misuse of black money in financing illegal activities and with an objective to tackle the issue of benami properties, the recently enacted Companies Amendment Act, 2017 (Amendment Act) has introduced new definitions of terms beneficial interest, significant beneficial owner and significant influence.

The definition of Beneficial Interest has been inserted through an amendment brought in Section 89 of the Companies Act, 2013:
Beneficial interest in a share includes, directly or indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with any other person to—
(i) exercise or cause to be exercised any or all of the rights attached to such share; or
(ii) receive or participate in any dividend or other distribution in respect of such share.

Another addition that has been made is with respect to associate company wherein the definition of ‘significant influence’ has been added. As per the new definition, Significant Influence means control of at least twenty per cent. of total voting power, or control of or participation in business decisions under an agreement.

Further, Significant Beneficial Owner has been defined as 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 twenty-five per cent, in shares of a company or the right to exercise, or the actual exercising of significant influence or control as, over the company.
The law now prescribes that significant beneficial owner shall make a declaration to the company, specifying the nature of his interest and other particulars.