Regulatory updates

Section 23 of the Companies Act, 2013 specifies regulations pertaining to public offer and private placement of securities. In 2020, the Ministry of Corporate Affairs (MCA) had amended it by inserting sub-regulations 3 and 4. These sub-regulations enabled certain class of public companies to issue prescribed class of securities for listing in identified stock exchange(s) in permissible foreign jurisdictions.

Additionally, it was specified that the Central Government could exempt any class or classes of public companies from the requirements of Chapter III, Chapter IV, Section 89, Section 90, or Section 127¹ Chapter III prescribes the requirements of issuing a prospectus and allotment of securities, Chapter IV prescribes the regulations pertaining to share capital and debentures, Section 89 discusses the requirements of declaration in respect of beneficial interest in any share, Section 90 discusses the need for registration of significant beneficial owners in a company and Section 127 prescribes the punishment for failure to distribute dividends. of the Companies Act, 2013.

In this regard, MCA, vide a notification dated 30 October 2023 has specified that the effective date for the applicability of sub-regulations 3 and 4 of Section 23 of the Companies Act, 2013 would be 30 October 2023

To access the text of the MCA notification, please click here

Recently, MCA notified the Limited Liability Partnership (Third Amendment) Rules, 2023 (the amendment). The amendment introduces two new Rules – Rule 22A and 22B in the Limited Liability Partnership Rules, 2009 (the LLP Rules 2009). These are discussed below:

• Rule 22A – Register of Partners: Rule 22A – Register of Partners, states that every LLP should, from the date of its incorporation, maintain a register of its partners in Form 4A at its registered office. The register should contain important particulars regarding the partners of the LLP, such as their names, address, date of becoming a partner, amount and nature of contribution, etc. Further, the amendment specifies that entries in the register should be made within seven days pursuant to any change made in the contribution amount, or in the name and details of the partners in the LLP agreement, or in cases of cessation of partnership interest. LLPs existing on the date of commencement of this amendment should maintain the register of partners in Form 4A within 30 days of such commencement.
• Rule 22B – Declaration w.r.t. beneficial interest in any contribution: The amendment specifies that a person whose name is entered in the register of partners, but who does not hold any beneficial interest fully or partly in the contribution (beneficial interest) should file with the LLP, a declaration to that effect in Form 4B . This form should be filed within a period of 30 days from the date on which the person’s name is entered in the register of partners. Any changes in the beneficial interest should be declared within 30 days of such change in Form 4B . Further, every person who holds or acquires a beneficial interest, but his/her name is not registered in the register of partners, should file with the LLP, a declaration disclosing such interest in Form 4C, within a period of 30 days after acquiring such beneficial interest. The LLP must record the declarations received in forms 4B and 4C. Within 30 days of receipt of such declarations, a return should be filed with the registrar in Form 4D. Also, the LLP should specify a designated partner who would be responsible for furnishing of and extending co-operation for providing information with respect to a beneficial interest in contribution to the registrar or any other authorised officer and file such information in Form 4 (the amendment specifies the revised Form 4) .

Effective date: The amendment came into force from the date of its publication in the Official Gazette, i.e., 27 October 2023.

To access the text of the amendment, please click here

On 9 November 2023, MCA issued the LLP (Significant Beneficial Owners) Rules, 2023 (the SBO Rules 2023). Some of the key provisions of the SBO Rules 2023 include:

• Applicability: The SBO Rules 2023 are applicable to any LLP, subject to such exemptions as specified herewith.
• Duty of the reporting LLP: It has been specified that every reporting LLP³ Reporting LLP means an LLP which is required to comply with the requirements of Section 90 of the Companies Act, 2013 should take the necessary steps to find out, if there’s any individual who is an SBO⁴ SBO refers to an individual, who acting alone or together or through one or more persons or trust, possesses one or more of the following rights or entitlements: - Holds indirectly or together with any direct holdings, not less than 10 per cent of the contribution
  - Holds indirectly or together with any direct holdings, not less than 10 per cent of the voting rights w.r.t. the management or policy decisions in the LLP
  - Has right to receive or participate in not less than 10 per cent of the total distributable profits, or any other distribution, in a F.Y. through indirect holdings alone or together with any direct holdings
  - Has right to exercise or actually exercises, significant influence or control, in any manner other than through direct-holdings alone. w.r.t. that LLP. If yes, then the LLP should identify him/her, and such individual should make a declaration in Form No. LLP BEN-1 . Further, every reporting LLP should in all cases, where its partner (other than an individual), holds not less than 10 per cent of its – contribution, or voting rights, or right to receive or participate in the distributable profits or any other distribution payable in a financial year, should give a notice to such partner in Form No. LLP BEN-4 , seeking requisite information
• Declaration of SBO: The SBO Rules 2023 specify that every individual, who is an SBO must file a declaration in Form No. LLP BEN-1 within 90 days from the commencement of the SBO Rules 2023. Also, every individual, who subsequently becomes an SBO, or where his/her ownership undergoes any change, should file a declaration in Form No. LLP BEN-1, within 30 days of acquiring such SBO or any change therein.
• Return of SBO in contribution: The reporting LLP should file a return in Form No. LLP BEN-2 with the registrar within a period of 30 days from the date of receipt of the declaration in Form No. LLP BEN-1.
• Register of SBO: It has been specified that an LLP should maintain a register of SBO in Form No. LLP BEN-3.

Effective date: The SBO Rules 2023 came into force from the date of their publication in the Official Gazette, i.e., 9 November 2023.

To access the text of the SBO Rules 2023, please click here