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India Entry Services helps foreign companies establish operations in India. The service assists with business structuring, necessary approvals, and compliance requirements for foreign businesses seeking to enter the Indian market.

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What is a FEMA compliance audit in India?

A FEMA compliance audit India is a structured review of a company's foreign exchange transactions and regulatory filings under FEMA 1999 and RBI's rules and master directions. It identifies missed FC-GPR and FC-TRS filings, FLA return gaps, ODI Annual Performance Report non-filings, valuation non-compliance, and instrument misclassifications that constitute compoundable contraventions.

2. How often should a foreign-owned Indian company conduct a FEMA compliance audit?

At minimum, a FEMA audit for foreign companies India should be conducted annually and mandatorily before any significant transaction including a new equity round, a secondary share sale, an M&A transaction, or an IPO. Violations discovered proactively can be compounded on the company's timeline. Violations discovered during due diligence must be compounded on the transaction's timeline.

What is the penalty for missing the FC-GPR filing deadline?

FC-GPR must be filed within 30 days of share allotment. Late filings attract a Late Submission Fee calculated on the amount involved and the delay period. If the delay is prolonged, the violation becomes compoundable under Section 13 of FEMA, attracting a penalty of up to three times the amount involved or ₹ 2,00,000 for non-reporting contraventions under the April 2025 revised compounding framework.

Can FEMA violations be regularised without going through the compounding process?

Some violations can be regularised by paying a Late Submission Fee through the FIRMS portal, which covers delayed FC-GPR and FC-TRS filings within a defined window. Violations beyond the LSF window, structural violations, or violations involving incorrect instrument classification or wrong FDI route require formal compounding through RBI.

What happens if a company's APR for ODI is not filed for multiple years?

The AD bank is required to block further outward remittances from the Indian entity until all outstanding APRs are filed. Additionally, the non-filing is a FEMA contravention subject to compounding. Backlogged APRs must be filed along with audited financial statements of the overseas entity for each year missed.

Does a FEMA compliance audit cover transfer pricing?

A FEMA compliance audit India focuses on foreign exchange compliance under FEMA and RBI regulations. Transfer pricing compliance under the Income Tax Act is a separate exercise. However, intercompany transactions reviewed during a FEMA audit often have transfer pricing implications and the two reviews are best conducted together for companies with significant related-party cross-border flows.

Beneficial Ownership Disclosure India: SBO Rules Guide

June 22, 2026
Gaurav Vashistha
Company Law Compliance India
0

Table of Content

Beneficial Ownership Disclosure India: Section 90, Forms and Compliance

Corporate ownership in India used to stop at the registered shareholder. That was enough. The law has since moved substantially beyond that position. Under Section 90 of the Companies Act 2013 and the Companies (Significant Beneficial Owners) Rules 2018, companies can no longer stop their review at the registered shareholder. They must trace the ownership chain and identify the actual individual who ultimately owns, controls, or benefits from the company’s shares, even if several holding companies, trusts, or LLPs sit between that person and the Indian entity.

Beneficial ownership disclosure India is not a periodic filing that happens once and is forgotten. It is a continuous obligation triggered by changes in ownership, changes in control, and changes in the particulars of whoever holds the position of Significant Beneficial Owner. Companies can no longer treat SBO compliance as a routine filing exercise. With increased scrutiny from the MCA throughout 2024 and 2025 and the introduction of revised disclosure requirements under the updated Form BEN-2 in July 2024, many businesses using older templates may unknowingly be falling short of current compliance expectations.

What Is Beneficial Ownership Disclosure in India and Who Is a Significant Beneficial Owner?

The SBO framework is designed to ensure transparency by identifying the real individuals behind a company’s ownership structure. Companies must disclose and report any Significant Beneficial Owner through Form BEN-2. An individual is typically considered an SBO if they hold at least 10% of the company’s shares, voting rights, or dividend rights, or have significant influence or control over its affairs.

The 10% threshold is based on beneficial ownership, not just the name that appears on the share register. For example, if an individual owns 12% of a foreign company that wholly owns an Indian subsidiary, that individual may still be treated as an SBO of the Indian company through indirect ownership. The ownership chain must be traced all the way back to the ultimate natural person.

Significant influence is defined as the ability to participate in financial and operating policy decisions but without control. Control means the right to appoint a majority of directors or to govern financial and operating policies. Either of these, even without crossing the 10% ownership threshold, triggers SBO status.

What the rules do not count as an SBO: a natural person who holds shares directly in their own name, as a registered member. That individual is already disclosed through the member register. The SBO rules are specifically designed to surface the beneficial owners behind corporate, trust, and nominee structures.

What Are the Key Forms Under Beneficial Ownership Disclosure India?

The SBO framework is built around four compliance forms that help companies identify, record, and report beneficial ownership. These forms cover everything from the initial declaration by the SBO to regulatory filings, internal record-keeping, and notices issued when a company believes an undisclosed beneficial owner may exist. The role of each form is explained below.

Form	Filed By	Filed With	Purpose	Timeline
BEN-1	Significant Beneficial Owner	The company	Declaration of SBO status and particulars	Within 30 days of becoming SBO or change in particulars
BEN-2	The company	Registrar of Companies (RoC)	Return of SBO declaration	Within 30 days of receiving BEN-1
BEN-3	The company	Maintained internally	Register of SBOs	Maintained continuously
BEN-4	The company	Sent to member	Notice requiring SBO declaration	When company has reason to believe someone is an SBO who has not declared

The 2024 amendment substituted the existing Form BEN-2 with a revised version on the MCA V3 portal. The revised form covers three scenarios under a single form: declaration of SBO status for the first time, change in particulars of an existing SBO, and cessation of SBO status. Companies filing BEN-2 using the pre-2024 form structure are not compliant with the current requirement.

What Changed in the 2024 Amendment to Beneficial Ownership Disclosure India?

The Companies (Significant Beneficial Owners) Amendment Rules 2024, notified on July 15 2024, substituted Form BEN-2 with a revised form on the MCA V3 portal. The new form requires digital signatures from authorised personnel, enhanced disclosure of indirect holdings including breakdown of the ownership chain, and covers three types of declarations within a single unified form.

Key changes from the July 2024 amendment:

The new BEN-2 is available only on the MCA V3 portal, consistent with MCA’s full migration from V2

The form now requires attachment of declaration documents, KYC of the SBO, and a detailed breakdown of indirect holdings showing each layer in the chain from the SBO to the Indian company

Authorised signatory digital signatures are required at filing

Three filing scenarios (initial declaration, change in particulars, cessation) are handled through the same form with different data fields activated based on selection

MCA issued a circular on July 4 2024 waiving additional fees for BEN-2 filings whose due dates fell between July 4 and July 14 2024, accommodating the transition from V2 to V3

For companies that have not reviewed their SBO filings since 2022 or 2023, the first compliance step is verifying whether the previously filed BEN-2 satisfies the new disclosure fields. If it does not, updated filings are required.

Does Beneficial Ownership Disclosure India Apply to LLPs?

The SBO framework was extended to LLPs through a 2023 amendment. LLPs are now required to identify Significant Beneficial Owners among their partners and beneficiaries, maintain a register equivalent to BEN-3, and file returns with the Registrar. The same 10% threshold and control-based tests apply.

This is the update that most LLPs operating in India have not yet addressed. Foreign-owned LLPs with complex partner structures, professional LLPs with trust-held partnership interests, and investment LLPs with layered ownership are all within scope. The obligation is not limited to companies under the Companies Act. Any LLP with an SBO must now comply with the same identification, declaration, and registration requirements.

What Are the Penalties for Non-Compliance with Beneficial Ownership Disclosure India?

Non-compliance with beneficial ownership disclosure India attracts penalties on both the company and the SBO.

If any person fails to make a declaration, he shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of one thousand rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.

The company is liable for a fine between Rs. 10 lakh and Rs. 50 lakh. Every officer in default is liable between Rs. 1 lakh and Rs. 10 lakh. An SBO who fails to make the required declaration is liable for a fine up to Rs. 50 lakh and imprisonment up to one year, or both.

If a company, required to maintain register fails to do so or denies inspection as provided therein, the company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day, after the first during which such failure continues, subject to a maximum of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, with a further penalty of two hundred rupees for each day, after the first during which such failure continues, subject to a maximum of one lakh rupees.

If any person wilfully furnishes any false or incorrect information or suppresses any material information of which he is aware in the declaration made under this section, he shall be liable to action under section 447.

The penalty provisions under Section 90 are among the more serious in the Companies Act 2013. The combination of corporate penalty, officer penalty, and personal criminal liability for the SBO reflects how seriously the legislature treats concealment of beneficial ownership.

Enforcement has moved beyond paperwork. MCA’s increased scrutiny through 2024 and 2025 has resulted in notices being issued to companies and individuals for SBO non-disclosure. Companies undergoing due diligence for M&A, fundraising, or IPO are finding SBO non-compliance identified as a material issue that must be regularised before the transaction proceeds.

Penalty Summary

Party	Default	Penalty
Company	Non Maintenance of Register	Rs. 1 Lakh to 5 Lakh
Officer in default	Non Maintenance of Register	Rs. 25000 to 1 Lakh
Significant Beneficial Owner	Failure to declare	Rs. 50000 to 2 Lakh
Member (nominee or intermediary)	Failure to comply with BEN-4 notice	The company may apply to the NCLT under Section 90(7) for restrictions on the relevant shares, including suspension of transfer, voting, and dividend rights.

What Is the Step-by-Step Process for Beneficial Ownership Disclosure India?

The beneficial ownership disclosure India process starts with the company identifying potential SBOs by looking through its shareholding structure to the natural persons behind corporate shareholders. Once identified, the company issues BEN-4 notices if declarations have not been voluntarily made, collects BEN-1 declarations, updates BEN-3, and files BEN-2 with the RoC within 30 days.

Practical steps:

Map the complete ownership structure of the company from registered shareholders upward to identify natural persons holding 10% or more of shares, voting rights, or dividend rights whether directly or indirectly

Identify any natural person exercising significant influence or control regardless of ownership percentage

For each potential SBO, check whether a BEN-1 declaration has been received. If not, issue Form BEN-4 notice requiring declaration within the prescribed period

On receiving BEN-1, update the BEN-3 register immediately

File Form BEN-2 on the MCA V3 portal within 30 days of receiving the BEN-1 declaration

When any particulars of an existing SBO change, a fresh BEN-1 must be filed and BEN-2 updated within 30 days

Designate a Company Secretary or Compliance Officer to monitor SBO status continuously, not just at incorporation

For foreign-owned Indian subsidiaries, the SBO is typically a natural person in the Japanese, UAE, Russian, or other foreign parent’s ownership chain. Mapping that chain and documenting it correctly in the BEN-2 attachment is the most common area where filings are incomplete.

Conclusion

Beneficial ownership disclosure India is no longer a compliance area that companies can manage reactively. The July 2024 amendment to Form BEN-2, the 2023 extension to LLPs, and the visible increase in enforcement activity through 2025 mean that companies which have not reviewed their SBO compliance recently are likely operating with outdated filings or no filings at all.

The review process is not complicated. The ownership mapping, BEN-1 collection, and BEN-2 filing on the current MCA V3 form can be completed systematically. What creates problems is discovering the gap during due diligence when a transaction timeline is already running.

Corporate Legit advises companies and foreign-owned subsidiaries on beneficial ownership disclosure India, covering ownership chain mapping, BEN-1 and BEN-2 filings under the 2024 amended form, BEN-3 register maintenance, and compliance remediation where historical filings are incomplete. Reach out to Corporate Legit to assess your current SBO compliance position.

Frequently Asked Questions

1. What is the threshold for becoming a Significant Beneficial Owner in India?

An individual is a Significant Beneficial Owner under Section 90 of the Companies Act 2013 if they hold 10% or more of the shares, voting rights, or dividend rights, directly or indirectly, or if they exercise significant influence or control over the company. The 10% threshold applies to beneficial interest, not just registered shareholding, meaning interests held through holding companies, trusts, or nominees are counted.

2. What changed in Form BEN-2 after the July 2024 amendment?

The Companies (Significant Beneficial Owners) Amendment Rules 2024, notified on July 15 2024, substituted the existing Form BEN-2 with a revised form on the MCA V3 portal. The new form requires digital signatures from authorised personnel, a detailed breakdown of indirect ownership chains, and handles three scenarios within a single form: initial declaration, change in particulars, and cessation of SBO status.

3. What is Form BEN-4 and when does a company issue it?

Form BEN-4 is a notice issued by the company to any member it has reasonable grounds to believe is a Significant Beneficial Owner who has not made the required declaration in Form BEN-1. The company issues BEN-4 when its own ownership mapping reveals a potential SBO who has not voluntarily come forward. The recipient must respond within the period specified in the notice.

4. What is the penalty for an SBO who fails to declare beneficial ownership in India?

An SBO who fails to make the required declaration in Form BEN-1 liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of one thousand rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees.

5. Does the SBO framework apply to LLPs in India?

Yes. The 2023 amendment extended the Significant Beneficial Owner framework to LLPs. LLPs must now identify SBOs among partners and beneficiaries, maintain a register equivalent to BEN-3, and file the required returns. The same 10% threshold and control-based tests that apply to companies under Section 90 apply to LLPs under the extended framework.