BEN-2 and Significant Beneficial Owners with a Foreign Parent (2026)

Written by CA Nandini, Krystal7 Consultants. Last updated 1 October 2026.

BEN-2 is the return an Indian company files with the Registrar of Companies (ROC) within 30 days of receiving a BEN-1 declaration. Section 90 of the Companies Act, 2013 and the Companies (Significant Beneficial Owners) Rules, 2018 require it. A significant beneficial owner (SBO) is an individual who holds at least 10 percent indirectly, or who exercises significant influence or control. A foreign parent is not exempt, so the Indian subsidiary must trace every layer itself.

This page explains how an Indian subsidiary finds its SBOs through a foreign group, and which forms, dates and penalties apply. It states the law as we read it on 1 Oct 2026. INR 1,00,000 is one lakh (100,000).

What is BEN-2 and who files it?

BEN-2 is the return of significant beneficial owners under section 90(4) of the Companies Act, 2013. The Indian company files it with the ROC, not the individual. It reports each SBO who has given the company a BEN-1 declaration. Rule 4 of the SBO Rules sets the deadline at 30 days from receipt of that BEN-1.

The Ministry of Corporate Affairs (MCA) notified the SBO Rules as G.S.R. 561(E) of 13 Jun 2018. It rewrote them through the Companies (Significant Beneficial Owners) Amendment Rules, 2019, G.S.R. 100(E) of 8 Feb 2019. The 2019 version rebuilt the definition around indirect holdings and a majority stake test. It added the duty in rule 2A and the BEN-4 notice to corporate members.

The MCA replaced Form BEN-2 with a revised version in July 2024. Always file on the current form on the MCA21 portal.

Section 90(1) covers any individual "acting alone or together, or through one or more persons or trust". It expressly includes "persons resident outside India". So a fund manager in New York can be an SBO of a company in Bengaluru. The rules call the Indian company the "reporting company".

Who is a significant beneficial owner?

An SBO is an individual who holds at least 10 percent of the Indian company's shares, votes or distributions indirectly. Direct holdings are added to the indirect ones. An individual who has, or actually exercises, significant influence or control other than through direct holdings alone is also an SBO. Rule 2(1)(h) sets these four tests.

Section 90(1) sets 25 percent "or such other percentage as may be prescribed". The rules prescribe 10 percent as a floor ("not less than"), so exactly 10 percent counts.

Test under rule 2(1)(h)	Threshold	How the right must be held
(i) Shares	At least 10% of the shares	Indirectly, or indirectly with direct holdings
(ii) Voting rights	At least 10% of the voting rights in the shares	Indirectly, or indirectly with direct holdings
(iii) Distributions	Right to at least 10% of the distributable dividend or other distribution in a financial year	Indirectly, or indirectly with direct holdings
(iv) Influence or control	Right to exercise, or actual exercise, of significant influence or control	Any manner other than direct holdings alone

Explanation I to rule 2(1)(h) says an individual with no indirect holding under the first three tests is not an SBO. Explanation II treats a holding as direct when the shares stand in the individual's own name. The same applies where the individual has declared a beneficial interest in them under section 89(2). A person who holds shares only in their own name already appears in the register of members. The MCA site blocks automated reading of the rule text, so read the consolidated SBO Rules on mca.gov.in before you quote them.

Three defined terms do most of the work:

1. Control has the meaning in section 2(27). It includes the right to appoint most directors or to control management or policy decisions. The right can come from shares, agreements or any other manner.
2. Significant influence is the power to take part, directly or indirectly, in the financial and operating policy decisions of the reporting company. It stops short of control or joint control.
3. Majority stake means more than one half of a body corporate's equity share capital or voting rights. A right to more than one half of its distributable dividend or other distribution also counts.

The Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023 (LLP SBO Rules) use the same two definitions.

How do the 10 percent tests work through a foreign parent?

The SBO Rules do not multiply percentages down a chain. An individual holds a member's stake indirectly only if they hold a majority stake in that member, or in the member's ultimate holding company. If they do, the member's whole holding counts as theirs. If they do not, none of it counts.

Explanation III to rule 2(1)(h) sets out who holds indirectly, member by member. Clause (v) refers to the Financial Action Task Force (FATF) and the International Organization of Securities Commissions (IOSCO). Explanations IV to VI then deal with funds that fail clause (v), individuals acting together, and convertible instruments.

Member of the Indian company	Individual treated as holding indirectly	Clause of Explanation III
Body corporate other than an LLP, Indian or foreign	Majority stake in that member, or in its ultimate holding company in India or abroad	(i)
Hindu Undivided Family	The karta	(ii)
Partnership entity (an Indian firm or LLP)	A partner; or a majority holder of a body corporate partner or of its ultimate holding company	(iii)
Trust, through its trustee	Trustee of a discretionary or charitable trust; beneficiary of a specific trust; author or settlor of a revocable trust	(iv)
Pooled investment vehicle, or an entity it controls, based in a FATF member State whose securities regulator is an IOSCO member	The general partner; the investment manager; or the investment manager's CEO where the manager is a body corporate or partnership entity	(v)

Clause (i) covers a body corporate whether incorporated or registered in India or abroad. It leaves out an LLP, which clause (iii) handles as a partnership entity. The ultimate holding company can also sit in India or abroad.

The LLP rules define an ultimate holding company as a section 2(46) holding company that is not a subsidiary of another body corporate. We read the company rules the same way. Section 2(46) treats any body corporate as a company, so a foreign parent can be a holding company. Under section 2(87), a company is a subsidiary where the parent controls its board or more than one half of its total voting power.

A founder with 45 percent of a Singapore parent is not an SBO on the shareholding tests. Their economic share of India is still 45 percent. A founder with 51 percent is an SBO, and the parent's whole holding counts as theirs. The control test in clause (iv) then catches people the shareholding tests miss.

How do you trace ownership through a foreign group?

Start from the Indian register of members and work upwards one member at a time. For each member holding 10 percent or more, classify its legal form, find its ultimate holding company, and test for majority stakes and control. Then send BEN-4 to each such member and record the answers.

Structure above the Indian company	Who is an SBO	Why
UK company owned 100% by one founder	The founder	Majority stake in the member
Singapore company: founder 55%, venture fund 45%	The founder; also test the fund for control	Majority stake in the member
Singapore company: founders at 34%, 33% and 33%	No one on shareholding; check any voting pact	No individual majority; founders acting together may hold control
Dutch company owned by a widely held US listed company	Usually no one	No individual majority in the member or at the top
US parent with dual class shares: founder has 15% of equity and 60% of votes	The founder	Majority of voting rights in the ultimate holding company
Singapore based venture fund holding 30% directly	General partner, investment manager or the manager's CEO	Clause (v); Singapore is a FATF member
Mauritius or UAE fund holding 26% directly	Test the fund's legal form and control	Not FATF members, so clause (v) does not apply on its face
SEBI registered Alternative Investment Fund holding 15%	No SBO for that holding	Rule 8 exemption

Three points help when reading the table:

1. The majority stake test sits at two places only: the member and its ultimate holding company. On our reading, a majority stake in a middle layer does not count on its own. The control test still reaches anyone in the chain.
2. "Acting together" in section 90(1) matters for founder groups. Founders who vote as a bloc under a voting agreement may hold control together.
3. Explanation VI to rule 2(1)(h) treats global depository receipts, compulsorily convertible preference shares and compulsorily convertible debentures as shares. Explanation V deems individuals who act with a common intent under any agreement or understanding to be "acting together".

Our foreign subsidiary compliance guide covers the rest of the annual load. Our note on a wholly owned subsidiary in India covers how the chain is set up at entry.

How are funds and trusts in the chain treated?

Clause (v) applies only if the fund, or the entity it controls, is based in a FATF member State. That State's securities regulator must belong to IOSCO. Then the general partner, investment manager, or the manager's CEO is the SBO. Explanation IV sends every other fund back to clauses (i) to (iv), so its legal form and the control test decide.

The FATF member list includes Singapore, the United Kingdom, the United States, Japan, Hong Kong and India. The Cayman Islands, Mauritius and the UAE are not on it; they take part through FATF style regional bodies instead. The Monetary Authority of Singapore, the US Securities and Exchange Commission and the UK Financial Conduct Authority are all IOSCO ordinary members.

Clause (v) lists a pooled investment vehicle, or an entity the vehicle controls, and then adds the words "based in" a FATF member State. The text does not say whether "based in" attaches to the fund or to the controlled entity.

Take a Cayman fund that controls a Singapore holding company. On one reading the Singapore company qualifies, and the manager's CEO is an SBO. On the other, clause (v) does not apply. We test both readings and record the result. Where the general partner and manager are both companies, clause (v) points to the manager's CEO.

Type of trust holding through its trustee	Individual treated as holding indirectly
Discretionary trust	Each trustee
Charitable trust	Each trustee
Specific trust (fixed beneficiaries)	Each beneficiary
Revocable trust	The author or settlor

Rule 8 takes funds regulated by SEBI, RBI, the insurance regulator (IRDAI) or the pension regulator (PFRDA) outside the rules. A US pension fund, a Singapore venture fund or a Cayman fund gets no rule 8 relief. Foreign funds sit in Explanation III(v) and Explanation IV, never in rule 8.

Which forms apply, from BEN-1 to BEN-4?

BEN-1 is the individual's declaration to the Indian company. BEN-2 is the company's return to the ROC. BEN-3 is the register the company keeps. BEN-4 is the notice the company sends to a person it believes is, or knows of, an SBO. Section 89 forms and MGT-7 run alongside.

Form	Prepared by	Sent to	Time limit	Source
BEN-1	Each SBO	The Indian company	30 days from becoming an SBO or any change	Section 90(1); rule 3
BEN-2	The Indian company	ROC, on the MCA21 portal	30 days from receipt of BEN-1	Section 90(4); rule 4
BEN-3	The Indian company	Kept at the company	Update on each BEN-1	Section 90(2); rule 5
BEN-4	The Indian company	Suspected SBO, person with knowledge, former SBO, corporate member of 10% or more	Reply within 30 days of the notice	Section 90(5) and (6); rules 2A(2) and 6
MGT-4 and MGT-5	Nominee and parent, for the nominee share	The Indian company	30 days from entry in the register or acquiring the interest, and from any change	Section 89(1) and (2); rules 9(1) and 9(2), Management Rules
MGT-6	The Indian company	ROC	30 days from receipt of the declaration	Section 89(6); rule 9(3)
MGT-7	The Indian company	ROC, as the annual return naming the designated person	60 days from the AGM	Section 92(4); rule 9(7), Management Rules

Section 90(5) lets the company send BEN-4 to "any person (whether or not a member of the company)". That covers a suspected SBO, anyone who knows an SBO's identity, and anyone who was an SBO in the previous three years. Rule 2A(2) adds a standing duty to send BEN-4 to each member that is not an individual. It applies where that member holds 10 percent or more of the shares, votes or dividend rights. Exactly 10 percent is enough.

A foreign parent usually triggers section 89 too. A private company needs two members, so groups keep one share with a nominee. That nominee is not an SBO, because the share is a direct holding with no indirect interest.

When is BEN-2 due?

BEN-2 is due within 30 days of the date the Indian company receives a BEN-1. The individual must give BEN-1 within 30 days of becoming an SBO or of any change. So an event abroad can reach the ROC up to 60 days later.

Take a share sale at the Singapore parent on 5 Oct 2026 that makes a founder an SBO. On our day count:

Step	Date	Rule
Founder becomes an SBO	5 Oct 2026	Rule 2(1)(h)
Last day to give BEN-1	4 Nov 2026	Rule 3
Company receives BEN-1	4 Nov 2026	Rule 4 clock starts
Last day to file BEN-2	4 Dec 2026	Rule 4

A fresh BEN-1 and BEN-2 follow any of these events:

1. A share sale, issue or change of control anywhere in the group that moves someone across 10 percent or a majority stake.
2. A new agreement that gives someone a veto or board right over the Indian company.
3. A change of a fund's general partner, manager or the manager's CEO.
4. An individual ceasing to be an SBO, or changing name, nationality or address.

BEN-2 carries the normal filing fee under the Companies (Registration Offices and Fees) Rules, 2014, which depends on nominal share capital. A late BEN-2 is accepted with an additional fee under the second proviso to section 403(1). The additional fee is a multiple of the normal fee, starting at two times and rising in steps to twelve times as the delay grows. The MCA site blocks automated reading of its fee page. Take the exact slab and multiple from the MCA fee schedule on the day you file.

What you pay	Basis	Where to check
Normal fee	Slab by nominal share capital	MCA fee schedule
Additional fee for delay	Multiple of the normal fee, rising with the delay	MCA fee schedule; section 403(1)
Penalty, if the ROC adjudicates	Section 90(11) amounts	Section 454 order

The additional fee does not close the matter. Section 403(1) allows a late filing "without prejudice to any other legal action or liability under this Act". The 30 day cure in the proviso to section 454(3) covers only sections 92(4), 137(1) and 137(2). It does not cover section 90.

Our compliance calendar for foreign owned companies lists BEN-2 among the event based filings.

Which parents and shareholders are exempt?

No foreign parent is exempt because it is foreign, listed or regulated. Rule 8 exempts only the Investor Education and Protection Fund (IEPF) Authority and an Indian holding reporting company. It also exempts Indian governments, their entities, and vehicles regulated by SEBI, RBI, IRDAI or PFRDA.

Holder of the Indian company's shares	Exempt under rule 8?	Note
IEPF Authority under section 125(5)	Yes	Rule 8(a)
Its Indian holding reporting company	Yes	The holding company's details still go in BEN-2
Central or State Government, or a local authority	Yes	Indian governments, on our reading
Entity controlled by the Central or a State Government	Yes	Indian government control
SEBI registered mutual fund, AIF, REIT or InvIT	Yes	SEBI regulated
Investment vehicle regulated by RBI, IRDAI or PFRDA	Yes	Indian regulator
Foreign company listed abroad	No	Often yields no SBO on shareholding; control test still applies
Foreign sovereign fund or state owned company	No, on our reading	Rule 8 names Indian governments
Foreign regulated fund	No	Clause (v) may name its manager instead

A proviso to rule 8 still requires the details of the holding reporting company to go in BEN-2. The LLP rules carry the same government and regulated vehicle exemptions.

A listed foreign parent is the case we see argued most often. In a widely held group, the answer is often "no SBO". The Indian company must still reach it through the rule 2A steps and keep the evidence.

What if the parent will not disclose?

Send BEN-4 under section 90(5) and allow 30 days to reply under section 90(6). If the reply is missing or unsatisfactory, the company must apply to the National Company Law Tribunal (NCLT) under section 90(7) and rule 7. The application is due within 15 days after the notice period ends. The NCLT can then restrict the rights attached to the shares in question.

The steps in order:

1. Ask the parent in writing, listing what you need and why.
2. Send BEN-4 to the member and to anyone likely to know, such as the fund's general partner.
3. Wait 30 days from the date of the notice.
4. Minute the board's view on whether the reply is satisfactory.
5. Apply to the NCLT within 15 days after the notice period ends if the information is missing or unsatisfactory.

Under section 90(8), the NCLT may make an order "restricting the rights attached with the shares". It acts within 60 days of receiving the application. Rule 7 lists the restrictions it may order.

Restriction the NCLT can order	Effect on the foreign parent
On transfer of interest in the shares	The parent cannot sell the Indian shares
Suspension of dividends or other distributions	No payout on those shares
Suspension of voting rights	No vote at general meetings
Any other restriction on rights attached to the shares	As the order states

Under section 90(9), the company or an aggrieved person may apply to relax or lift the restrictions within one year of the order. If nobody applies, the shares "shall be transferred, without any restrictions" to the IEPF Authority under section 125(5).

The Indian company cannot impose these restrictions itself. Section 90(7) says the company "shall" apply, so sitting on a refusal is itself a default. It also risks a penalty under section 90(11) for failing to take the section 90(4A) steps.

When a parent pushes back, the reason we hear is privacy. A note on who sees the data, with a confidentiality letter, usually settles it.

What are the penalties for missing BEN-1 or BEN-2?

An individual who fails to declare faces INR 50,000 under section 90(10). Each further day adds INR 1,000, up to INR 2,00,000. Under section 90(11), a company that fails to file BEN-2 or keep the register faces INR 1,00,000. That grows by INR 500 a day, up to INR 5,00,000. Each officer in default faces INR 25,000 plus INR 200 a day, up to INR 1,00,000.

Default	Who pays	Penalty	Maximum	Source
No BEN-1	The SBO	INR 50,000, plus INR 1,000 for each day after the first	INR 2,00,000	Section 90(10)
No register, no BEN-2, no section 90(4A) steps, or inspection refused	The Indian company	INR 1,00,000, plus INR 500 for each day after the first	INR 5,00,000	Section 90(11)
Same default	Each officer in default	INR 25,000, plus INR 200 for each day after the first	INR 1,00,000	Section 90(11)
Wilfully false information, or suppression, in a declaration	The person making it	Action under section 447	As in section 447	Section 90(12)
No section 89 declaration	Nominee or parent	INR 50,000, plus INR 200 a day	INR 5,00,000	Section 89(5)
No MGT-6	Company; officer in default	INR 1,000 a day	INR 5,00,000 (company); INR 2,00,000 (officer)	Section 89(7)

Section 447 carries imprisonment of six months to ten years and a fine of at least the amount involved, up to three times it. A smaller fraud has a lower ceiling. The threshold is INR 10 lakh or 1 percent of turnover, whichever is lower. Below it, and with no public interest, the maximum is five years or INR 50 lakh, or both.

The ROC imposes section 90 penalties by adjudication under section 454. An appeal lies to the Regional Director within 60 days of receiving the order. Not complying with an order within 90 days is an offence under section 454(8).

Section 446B halves the penalty for a One Person Company, small company, start up company or Producer Company. It caps it at INR 2,00,000 for the company and INR 1,00,000 for an officer. A subsidiary of a foreign body corporate is never a small company under section 2(85). It gets the half rate only if the Department for Promotion of Industry and Internal Trade (DPIIT) recognises it as a start up.

How does the SBO test differ from bank KYC and the land border rule?

Three beneficial owner tests apply to the same Indian subsidiary. The Companies Act test uses the majority stake rule plus control. RBI's KYC test looks at ownership above 10 percent. The FDI land border test now uses the definition in the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules). One structure can give three different lists.

Point	Section 90 SBO	Bank KYC beneficial owner	FDI land border beneficial owner
Law	Companies Act, 2013; SBO Rules	PML Rules, rule 9(3); RBI KYC Directions, 2025	Foreign Exchange Management (Non Debt Instruments) Rules, 2019, rule 6(a), as amended by S.O. 2174(E) of 1 May 2026
Ownership threshold	At least 10% indirectly, through a majority stake in a member or its ultimate holding company	More than 10% of shares, capital or profits	PML Rules definition; non controlling ownership up to 10% on the automatic route
Control limb	Significant influence or control	Control through other means	Part of the PML definition
Listed parent	No exemption	Bank need not identify owners of a listed entity or its subsidiary	Not stated in the release
Reported to	ROC, in BEN-2	The bank	Government approval or the FDI filing

RBI issued separate Know Your Customer Directions, 2025 for each class of regulated entity on 28 Nov 2025, in force from the date of issue. We read the Payments Banks version, RBI/DOR/2025-26/218. Paragraph 5(1)(iv)(a) sets the test for "controlling ownership interest". It means "ownership of / entitlement to more than 10 per cent of the shares or capital or profits of the company".

Under paragraph 38(1) of that version, a bank need not identify owners of a company listed in India. The same goes for a company resident and listed in a jurisdiction the Central Government has notified. The same applies to a subsidiary of such a listed company. Both tests come from rule 9(3) of the PML Rules, so the Commercial Banks Directions carry them too. Paragraph numbers can differ between versions, so ask your bank which version and paragraph it applies.

On 10 Mar 2026 the Cabinet approved changes for investment from countries that share a land border with India. The release says the policy now uses "a definition and criteria for determination of Beneficial Ownership" from the Prevention of Money Laundering Rules, 2005. Investors whose beneficial ownership from such a country is non controlling and up to 10 percent may use the automatic route. The Foreign Exchange Management (Non Debt Instruments) (Amendment) Rules, 2026, S.O. 2174(E) of 1 May 2026, put the new test into rule 6(a) of the NDI Rules. It ties beneficial ownership to rule 9(3) of the PML Rules.

Our note on FDI, FPI and the 10 percent line covers the FEMA side of the parent's investment.

Who is the designated person in MGT-7?

Every company must designate a person to give the ROC information on beneficial interest in its shares. Rule 9(4) of the Companies (Management and Administration) Rules, 2014 sets the duty. The company names that person in its annual return, MGT-7, each year. The designated person is an officer of the Indian company, not the SBO.

The MCA inserted rules 9(4) to 9(8) through the Companies (Management and Administration) Second Amendment Rules, 2023, G.S.R. 801(E) of 27 Oct 2023. A change of designated person goes to the ROC in Form GNL-2.

Rule	What it says
9(4)	Every company designates a person to furnish, and help provide, information on beneficial interest in its shares to the ROC
9(5)	The company may pick a company secretary, another key managerial person, or every director if it has neither
9(6)	Until it designates, the company secretary is deemed designated; failing one, the managing director or manager; failing those, every director
9(7)	The company gives the designated person's details in the annual return
9(8)	The company reports a change of designated person to the ROC in Form GNL-2

Without a company secretary, every director is deemed designated, foreign directors included. We recommend a board resolution naming one resident director. Our guide to MGT-7 and AOC-4 for foreign owned companies covers the rest of the annual return.

What documents should the foreign parent provide?

Ask the parent for a signed group chart up to the ultimate holding company and the registers of members. Add any shareholders or voting agreement, and identity papers for each SBO. Funds and trusts need extra papers. Ask once, in one list, at incorporation and again at each change.

Document	Why we need it
Group chart to the ultimate holding company, with shares, votes and dividend rights at each level	Finds the members and the top company
Register of members of each member holding 10% or more	Tests majority stakes in the member
Register or major holder report of the ultimate holding company, or the latest annual report if listed	Tests majority stakes at the top
Articles or bylaws, shareholders and voting agreements	Catch dual class shares, vetoes and board rights
Fund papers naming the general partner, manager, manager's CEO, home jurisdiction and regulator	Apply clause (v)
Trust deed extract naming the trust type, trustees, settlor and beneficiaries	Apply clause (iv)
Signed reply to BEN-4 on letterhead	Evidence of the rule 2A steps
Signed BEN-1 from each SBO, with passport and address proof	Supports BEN-2 and BEN-3

Our Singapore to India registration guide covers the papers a Singapore parent gives at entry.

What changed in 2026

We found no change to section 90 or the SBO Rules in 2026. The changes sit in the tests that run beside the SBO test.

Area	Old position	New position	Date	Instrument
Bank KYC beneficial owner	KYC Master Direction, 2016	Separate KYC Directions for each class of regulated entity; above 10% test and listed entity relief kept	Issued 28 Nov 2025	RBI KYC Directions, 2025
FDI from land border countries	Any beneficial owner from such a country meant the government route	PML Rules definition; non controlling ownership up to 10% on the automatic route	Cabinet approval 10 Mar 2026	PIB release; NDI (Amendment) Rules, 2026, S.O. 2174(E) of 1 May 2026
SBO Rules for companies	G.S.R. 100(E) of 8 Feb 2019, with a revised Form BEN-2 from July 2024	No change found in 2026	Not applicable	Check the consolidated rules on mca.gov.in
Corporate Laws (Amendment) Bill, 2026	Not applicable	Introduced 23 Mar 2026; with a Joint Committee; not law	Pending	Bill No. 85 of 2026; nothing in it is law on 1 Oct 2026. Read the Bill and the Joint Committee report for any change to sections 89 and 90

Worked example

Lion Tech India Private Limited (Lion India) has 10,00,000 equity shares of INR 10 each. Lion Holdings, a Singapore company, holds 9,99,999 shares. Founder A holds one share as nominee for Lion Holdings.

Shareholder of Lion Holdings	Stake	Rights under the shareholders agreement
Harbour Fund LP, a Cayman Islands exempted limited partnership	60%	Appoints three of five directors
Founder A	25%	One director; veto over Lion India's annual budget
Founder B	15%	One director; no veto

Harbour Fund's general partner is Harbour GP Ltd, a Cayman company that Ms R owns outright. Ms R is also CEO of the fund's investment manager, a US company. A US pension fund holds 30 percent of the fund, and a family office from China holds 12 percent. Assume the fund documents confirm the partnership is not a body corporate.

Who is an SBO of Lion India?

1. Members of 10 percent or more. Only Lion Holdings. Founder A's nominee share is a direct holding with no indirect element.
2. Majority stakes. No individual holds more than half of Lion Holdings. Harbour Fund is not a body corporate, so Lion Holdings has no holding company above it. If Harbour GP Ltd held the shares in its own name, Ms R would be an SBO under clause (i).
3. Clause (v). The Cayman Islands is not a FATF member, but Singapore is. Lion Holdings is an entity the fund controls, based in Singapore. If "based in" attaches to the controlled entity, the CEO of the investment manager is an SBO. That is Ms R.
4. Control. Harbour controls the Lion Holdings board, which controls Lion India. Ms R controls Harbour GP Ltd, which runs the fund. She exercises control other than through direct holdings. Every route leads to her.
5. Significant influence. Founder A's veto over Lion India's budget is a power to take part in its financial and operating policy decisions. On our reading he is an SBO under clause (iv). Founder B has one of five parent board seats and no veto. We record a reasoned finding that he is not an SBO.

Person	Economic share of Lion India	Majority stake?	Influence or control?	SBO?
Ms R	None held directly	No	Yes, through the general partner	Yes
Founder A	25% x 100% = 25%	No	Yes, budget veto	Yes, on our reading
Founder B	15% x 100% = 15%	No	No	No, with a reasoned note
US pension fund	60% x 30% = 18%	No	No	No, and not an individual
China family office	60% x 12% = 7.2%	No	No	No

Lion India sends BEN-4 to Lion Holdings and to Harbour GP Ltd. It collects BEN-1 from Ms R and Founder A, files BEN-2 within 30 days of receipt, and updates BEN-3.

Lion India's bank applies the KYC test of more than 10 percent on a look through basis. Its test points to Founder A (25 percent), Founder B (15 percent) and whoever controls Harbour Fund. The ROC record names A and Ms R. Both lists are right for their own law.

The China family office has 7.2 percent of both Lion Holdings and Lion India on a look through basis, with no control. Under the Cabinet decision of 10 Mar 2026, that stays on the automatic route. Before it, any beneficial owner from a land border country pushed the investment to the government route.

What a late BEN-2 costs

On 10 Jul 2026 Founder A buys 27 percent of Lion Holdings from Harbour Fund and reaches 52 percent. He now holds a majority stake in the member. He gives a fresh BEN-1 on 5 Aug 2026, so BEN-2 is due by 4 Sep 2026. The company files on 18 Nov 2026, 75 days late. Lion India has two directors and no company secretary.

Item	Working	INR
Normal BEN-2 fee and additional fee for 75 days	MCA fee schedule for Lion India's nominal capital	As the MCA21 portal computes
Company penalty exposure, section 90(11)	1,00,000 + (500 x 74 days after the first)	1,37,000
Exposure per officer in default	25,000 + (200 x 74)	39,800
Exposure for two directors	39,800 x 2	79,600
Total penalty exposure	1,37,000 + 79,600	2,16,600
Company exposure if Lion India were a DPIIT recognised start up	1,37,000 / 2, section 446B	68,500

The caps bite late: after 800 days for the company, 375 for an officer and 150 for an individual who never gives BEN-1. The ROC's adjudication order sets the actual penalty.

Common mistakes

1. Treating a foreign or listed parent as exempt. Rule 8 names only Indian holders and Indian regulated vehicles. Fix: run the rule 2A steps for every foreign member of 10 percent or more.
2. Multiplying percentages. A founder with 30 percent of the parent is not an SBO on the shareholding tests. Fix: apply the majority stake test at the member and the ultimate holding company.
3. Stopping at the shareholding tests. Vetoes, board rights and dual class shares create SBOs. Fix: read every shareholders and voting agreement in the chain.
4. Assuming every regulated fund passes clause (v). Cayman, Mauritius and UAE funds fail the FATF condition. Fix: check the fund's home jurisdiction and regulator, then test its legal form and control.
5. Skipping BEN-4. Rule 2A(2) requires a notice to each corporate member of 10 percent or more. Fix: send BEN-4 at incorporation and after each group change.
6. Missing group level changes. A sale at the top company can create or remove an SBO with no change in India. Fix: add a covenant that the parent reports any change within 15 days.
7. Thinking the additional fee settles the default. Section 403 says late filing is "without prejudice". The section 454(3) cure does not cover section 90. Fix: file at once and record the reasons for the delay.
8. Leaving every director as the deemed designated person. Foreign directors then carry a duty they do not know about. Fix: name one person under rule 9(4) and show it in MGT-7.

Checklist

1. List every member holding 10 percent or more from the Indian register of members.
2. Classify each such member as a body corporate, partnership entity, trust, HUF or pooled investment vehicle.
3. Obtain a signed group chart from each member up to its ultimate holding company.
4. Test for a majority stake in each member and in its ultimate holding company.
5. Check each fund's home jurisdiction against the FATF list and its regulator against IOSCO.
6. Read every shareholders, voting and fund agreement for vetoes, board rights and weighted votes.
7. Send BEN-4 to each corporate member of 10 percent or more, and to anyone likely to know.
8. Minute the board's view on each reply.
9. Collect BEN-1 from each SBO with passport and address proof.
10. File BEN-2 within 30 days of receiving each BEN-1, and update BEN-3.
11. File MGT-4, MGT-5 and MGT-6 for the nominee share.
12. Name the rule 9(4) designated person by board resolution and show it in MGT-7.
13. Repeat steps 1 to 10 after every change in the group above India.
14. Apply to the NCLT under section 90(7) within 15 days after the BEN-4 period ends if a reply is missing or unsatisfactory.

Krystal7 runs this tracing within our company compliance service. Send your group chart through our contact page and we will tell you who must declare.

Frequently Asked Questions

Does an Indian company file a nil BEN-2 when no one qualifies?+

No. Rule 4 ties BEN-2 to the receipt of a BEN-1, so no BEN-1 means no BEN-2. The company must still take the steps in section 90(4A) and rule 2A, including BEN-4 notices to corporate members of 10 percent or more. Keep the replies and a board minute as evidence.

Does a subsidiary of a US listed company need an SBO?+

Often not, but it must check. If no individual holds a majority stake in the listed ultimate holding company, the shareholding tests name nobody. A founder with more than half the votes through dual class shares is an SBO. The Indian company sends BEN-4 to its parent and keeps the answer under rule 2A.

Is the nominee who holds one share for the parent an SBO?+

No. The nominee holds that share directly and has no indirect interest, so Explanation I to rule 2(1)(h) keeps them out. The nominee files MGT-4 under section 89(1), the parent files MGT-5 under section 89(2), and the company files MGT-6 with the ROC within 30 days.

Can a company or a fund be a significant beneficial owner?+

No. Section 90(1) applies to "every individual". A company, fund or trust is a link in the chain. The SBO is the individual behind it, such as a majority holder, a general partner, a fund manager's CEO or a trustee. Only an individual signs a BEN-1.

Is exactly 10 percent enough to make someone an SBO?+

Yes, if the 10 percent is held indirectly. Rule 2(1)(h) sets 10 percent as a floor for shares, voting rights and distributions, so exactly 10 percent counts. Bank KYC uses "more than 10 per cent", so a 10 percent holder can be an SBO for the ROC but not a beneficial owner for the bank.

How often does a company file BEN-2?+

Each time it receives a BEN-1. There is no annual BEN-2. An SBO gives a fresh BEN-1 within 30 days of any change under rule 3, and the company files within 30 days of receipt. A year with several group deals can need several BEN-2 filings.

Can the Indian company stop dividends to a parent that will not disclose?+

Not on its own. Only the NCLT can restrict the rights attached to shares, under section 90(8), after an application under section 90(7). The order can suspend dividends and votes or block transfers. The company must apply within 15 days after the 30 day BEN-4 period ends without a satisfactory reply.

How does section 89 differ from section 90?+

Section 89 deals with a share registered in one person's name but owned beneficially by another, such as a nominee share. It uses MGT-4, MGT-5 and MGT-6. Section 90 deals with individuals who own or control the company through layers, using BEN-1 to BEN-4. A foreign owned subsidiary usually needs both.

Does an Indian LLP owned by a foreign company follow the same rules?+

It follows parallel rules. The Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023, G.S.R. 832(E) of 9 Nov 2023, apply the same 10 percent and majority stake design to contribution and profit shares. The pooled investment vehicle clause matches, and the exemptions cover governments and Indian regulated vehicles.

Is a parent owned by a foreign government exempt?+

Not on our reading. Rule 8 exempts the Central Government, State Governments, local authorities and entities they control. Those words point to Indian governments. A foreign sovereign fund or state company is tested like any other member, usually through the control test.

Does the land border FDI rule use the SBO definition?+

No. The Cabinet decision of 10 Mar 2026 adopted the beneficial ownership definition in the Prevention of Money Laundering Rules, 2005. Non controlling beneficial ownership from a land border country up to 10 percent stays on the automatic route. The section 90 analysis is separate and still needed for BEN-2.

What happens to shares if NCLT restrictions stay for a year?+

Under section 90(9), the company or an aggrieved person can apply for relaxation within one year of the NCLT order. If nobody applies in that year, the shares move without restriction to the IEPF Authority under section 125(5). The foreign parent then loses them.

Will the ROC accept a BEN-2 filed late?+

Yes, with an additional fee under section 403. The filing is "without prejudice to any other legal action". The ROC can still adjudicate a penalty under section 90(11) through section 454. The 30 day cure in the section 454(3) proviso applies only to annual return and financial statement filings.

Who inside the Indian company answers for SBO compliance?+

The company and every officer in default carry the section 90(11) penalty. The designated person under rule 9(4) of the Management Rules answers the ROC on beneficial interest, and MGT-7 names that person. Without a designation, the company secretary is deemed responsible, or failing one every director.

Does a change in the fund's manager need a new BEN-2?+

Yes, where clause (v) or the control test made the manager's CEO or general partner an SBO. A new CEO becomes an SBO and the outgoing one ceases. Each gives a BEN-1 within 30 days under rule 3, and the company files BEN-2 within 30 days of receipt.

Sources

• Income Tax Department, Companies Act, 2013 section 90 (register of significant beneficial owners), read 1 Oct 2026, https://www.incometaxindia.gov.in/w/section-90-93
• Income Tax Department, Companies Act, 2013 section 89 (declaration in respect of beneficial interest), read 1 Oct 2026, https://www.incometaxindia.gov.in/w/section-89-92
• Income Tax Department, Companies Act, 2013 section 2 (clauses 27, 46 and 87), read 1 Oct 2026, https://www.incometaxindia.gov.in/w/section-2-148
• Income Tax Department, Companies Act, 2013 section 403 (fee for filing), read 1 Oct 2026, https://www.incometaxindia.gov.in/w/section-403-2
• Income Tax Department, Companies Act, 2013 section 446B (lesser penalties for certain companies), read 1 Oct 2026, https://www.incometaxindia.gov.in/w/section-446b
• Income Tax Department, Companies Act, 2013 section 447 (punishment for fraud), read 1 Oct 2026, https://www.incometaxindia.gov.in/w/section-447-2
• Income Tax Department, Companies Act, 2013 section 454 (adjudication of penalties), read 1 Oct 2026, https://www.incometaxindia.gov.in/w/section-454-2
• Ministry of Corporate Affairs, Companies (Significant Beneficial Owners) Rules, 2018 (G.S.R. 561(E), 13 Jun 2018), Amendment Rules, 2019 (G.S.R. 100(E), 8 Feb 2019) and Companies (Management and Administration) Second Amendment Rules, 2023, https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/notifications.html
• India Code, Companies (Significant Beneficial Owners) Amendment Rules, 2019, https://indiacode.gov.in/server/api/core/bitstreams/6e20438b-42ed-476b-ba8e-95a1df3b248e/content
• Gazette of India, Companies (Management and Administration) Second Amendment Rules, 2023, G.S.R. 801(E), 27 Oct 2023, https://egazette.gov.in/WriteReadData/2023/249763.pdf
• Gazette of India, Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023, G.S.R. 832(E), 9 Nov 2023, https://egazette.gov.in/WriteReadData/2023/250012.pdf
• Reserve Bank of India, Reserve Bank of India (Payments Banks, Know Your Customer) Directions, 2025, RBI/DOR/2025-26/218, 28 Nov 2025, https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=13090&Mode=0
• Press Information Bureau, Cabinet approves changes in guidelines on investments from countries sharing land border with India, 10 Mar 2026, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2237806
• Reserve Bank of India, Foreign Exchange Management (Non Debt Instruments) Rules, 2019, updated up to 12 Jun 2026, with the amendment by S.O. 2174(E) of 1 May 2026, https://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=5083
• Financial Action Task Force, member jurisdictions, read 1 Oct 2026, https://www.fatf-gafi.org/en/countries.html
• International Organization of Securities Commissions, ordinary members, read 1 Oct 2026, https://www.iosco.org/about/?subsection=membership&memid=1
• Ministry of Corporate Affairs, fee schedule under the Companies (Registration Offices and Fees) Rules, 2014, https://www.mca.gov.in/content/mca/global/en/mca/fo-llp-services/enquire-fees.html
• Gazette of India, Corporate Laws (Amendment) Bill, 2026 as introduced on 23 Mar 2026, https://egazette.gov.in/WriteReadData/2026/271201.pdf