Unraveling the 'Significant Beneficial Owner' (SBO) Concept in India© 2025 Vedashray Corpsec LLP. All rights reserved
In the intricate world of corporate compliance, transparency is paramount. India, like many other nations, has been on a drive to identify the ultimate real owners of companies, rather than just the shell entities or nominees. This is where the concept of a Significant Beneficial Owner (SBO) comes into play, under Section 90 of the Companies Act, 2013, read with the Companies (SBO) Rules, 2018.
What is an SBO?
An SBO is an individual who holds ultimate beneficial interest of not less than 10% in a company. This "beneficial interest" isn't always direct; it can be held indirectly, or through a combination of direct and indirect holdings. The aim is to peel back the layers of corporate structures – like trusts, partnerships, or other companies – to find the human being who truly controls or benefits from the shares.
The Importance of Identification and Declaration
- Anti-Money Laundering (AML) / Combating Financing of Terrorism (CFT): It prevents companies from being used as conduits for illicit financial activities by exposing the true beneficiaries.
- Corporate Governance: It promotes greater accountability and makes it harder for individuals to hide their true interests or avoid liabilities.
- Regulatory Compliance: It helps regulatory bodies monitor ownership patterns and prevent market manipulation or fraudulent activities.
The Bottom Line
For businesses, it's not just about filling out a form; it's about understanding the spirit of the law – knowing who truly owns and controls your company – and meticulously documenting it.