NON-FILING OF BEN-2: ROC BANGALORE IMPOSES ₹10 LAKH PENALTY ON CHONGQING JIELI INDIA PRIVATE LIMITED

 NON-FILING OF BEN-2: ROC BANGALORE IMPOSES ₹10 LAKH PENALTY ON CHONGQING JIELI INDIA PRIVATE LIMITED

FACTS OF THE CASE 

Chongqing Jieli India Private Limited had a foreign holding company, Chongqing Jieli Wheel Manufacturing Co. Ltd., China, holding 99.99% of the shares of the Indian company.

During an inquiry under Section 206(4) of the Companies Act, the Inquiry Officer noted that the company had not filed Form BEN-2 with the Registrar of Companies.

ROC Bangalore imposed a penalty of ₹10 lakh on Chongqing Jieli India Private Limited for non-filing of BEN-2, reflecting serious lapses in compliance with the Companies Act, 2013. The order highlights the company’s failure to disclose beneficial ownership, a critical requirement under Section 90, and penalizes both the company and its officers in default.

WHAT IS THE LAPSE?

·       Section 90 mandates disclosure of significant beneficial ownership.

·       Rule 3 of the Companies (Significant Beneficial Owners) Rules, 2018 requires filing of BEN-2 within 30 days of receipt of BEN-1 declaration.

·       Non-compliance attracts penalties under Section 450/454 of the Act.

ARGUMENT BY THE COMPANY

The company submitted that its foreign holding company was itself held by four individuals:

• Ping Zeng–1%

• Sun Zhihao–33%

• Sun Haochun–33%

• Sun Yuqi–33%

The company's position was that none of these individuals individually held more than 50% of the holding company. Therefore, according to the company, none of them satisfied the "majority stake" test for indirect holding.

The company further stated that:

➡️No individual exercised control over the holding company;

➡️There was no written agreement giving any director control over management or policy decisions of the Indian company; and

➡️Consequently, Section 90 should not apply and there was no requirement to file BEN-2.

The company also referred to a legal opinion obtained from a PCS supporting its position.

WHAT DID ROC BANGALORE SAY?

ROC Bangalore did not accept this explanation.

The ROC referred to Section 90 read with the Companies (Significant Beneficial Owners) Rules, 2018 and observed that the relevant threshold for determining SBO includes an individual who holds, directly or indirectly, not less than 10% of the voting rights, along with the applicable control provisions.

The ROC specifically observed:

“the Directors who holds more than prescribed limits shall file BEN-1 to company and the Company has to file BEN-2.”

Accordingly, the ROC concluded that the company had violated Section 90 read with Rule 2(1)(h) of the SBO Rules.

The ROC specifically directed the company and officers to file:

MGT-6 and BEN-2 within 60 days from the date of the order, after following the due process.

BOARD & COMPLIANCE OFFICERS SHOULD THEREFORE ENSURE:

✔ Identification of SBOs

✔ Timely BEN-1 disclosures

✔ Verification of the information received

✔ Timely filing of BEN-2

✔ Maintenance of supporting records

A missed BEN-2 filing can become a significant corporate-law compliance exposure.

KEY TAKEAWAY

BEN compliance cannot be examined merely by looking at the immediate shareholder of the Indian company. Where the shareholder is a foreign body corporate, the ownership and control structure behind that entity becomes extremely important. “No individual holds more than 50%” should not, by itself, be treated as the end of the SBO analysis.

#Section 90 read with Rule 2(1)(h) of the SBO Rules,

The shareholding, voting rights, indirect holding and control arrangements need to be examined carefully before concluding that BEN-1/BEN-2 is not applicable.

 

# Your Compliance expert R V SECKAR, FCS, LLB 79047 19295,