BEN-1 and BEN-2: Beneficial Ownership Compliance

TL;DR

BEN-1 is filed by the reporting company to disclose its beneficial owner(s) — the natural person who ultimately owns or controls the company.

The Significant Beneficial Owner (SBO) regime was introduced by the Companies Act, 2013 (Section 90) read with the Companies (Significant Beneficial Owners) Rules, 2018. The objective is to identify the natural person who ultimately owns or controls a company — even if the company is held through multiple layers of entities. The reporting is done through two forms: BEN-1 (the declaration by the beneficial owner) and BEN-2 (the return filed by the reporting company). Both are filed on the MCA portal.

Who Is a Significant Beneficial Owner

An SBO is a natural person who:

• Holds indirectly or together with any other persons, not less than 10% of the shares of the reporting company, OR
• Has the right to exercise or actually exercises significant influence or control over the reporting company (whether through shares, voting rights, or through any other means, including agreements, arrangements, or understandings).

The test is on the ultimate natural person, not the intermediate entity. If company A is 100% owned by company B, and company B is 60% owned by Mr X, then Mr X indirectly holds 60% of company A — and is the SBO of company A.

The threshold of “10%” applies to holdings through entities. For a holding through a chain of entities, the effective percentage is the product of the holdings at each layer.

Who Must File BEN-1

Every reporting company must identify its SBO and file BEN-2. The reporting company is every company incorporated under the Companies Act, 2013, except:

• Companies listed on a recognised stock exchange (the shareholding is in the public domain through the stock exchange filings).
• Companies whose shares are held by a registered mutual fund or a venture capital fund (in some cases).
• Companies where the SBO is identified through a Trust, where the trustee is the SBO and the trust is registered.

For all other companies — including Pvt Ltd, public unlisted, OPC, and LLPs — the SBO regime applies.

Who Must File BEN-1

The SBO themselves must file BEN-1 to the reporting company. The SBO is required to declare their beneficial ownership, the chain through which the ownership is held, and the date of acquisition. BEN-1 is filed with the reporting company (not directly with the RoC). The reporting company then files BEN-2 with the RoC.

For a single founder who owns 100% of a Pvt Ltd, the founder is the SBO of the company. The founder files BEN-1 with the company (their own company, in this case). The company files BEN-2 with the RoC.

For a chain of holdings (A owned by B, B owned by C, C owned by Mr X), Mr X files BEN-1 with company A. Company A files BEN-2 with the RoC.

The BEN-1 Process

1. The SBO identifies themselves — based on the ownership chain.
2. The SBO prepares BEN-1 — in the prescribed form, declaring:
   • Name, PAN, Aadhaar, nationality.
   • Date of birth.
   • Permanent and present address.
   • Mobile number and email.
   • Date of acquisition of beneficial ownership.
   • The chain of ownership (the entities and the percentages).
   • Whether the SBO is a resident Indian, NRI, or foreign national.
3. The SBO signs BEN-1 — with DSC or e-Sign (Aadhaar OTP).
4. The SBO submits BEN-1 to the reporting company — typically via email or hard copy.
5. The reporting company maintains a register of SBO — the SBO declaration is preserved.

For multiple SBOs (e.g., a holding structure with two natural persons who each indirectly own more than 10%), each SBO files a separate BEN-1.

The BEN-2 Process

1. The reporting company prepares BEN-2 — in the prescribed form, listing:
   • CIN, name, registered office.
   • Each SBO’s details (name, PAN, date of birth, address).
   • The date of SBO declaration received.
   • The chain of ownership.
2. The company signs BEN-2 — by a director / manager / CEO / CFO using DSC.
3. The company files BEN-2 on the MCA portal — under MCA Services → Company Services → BEN-2.
4. The RoC processes the form — typically within 1–3 working days.
5. The SBO is reflected in the MCA database — the MCA’s master database is updated with the SBO details.

The Filing Deadlines

BEN-1

The SBO must file BEN-1 within 30 days of acquiring the beneficial ownership. For an SBO who was already a beneficial owner before the Rules came into force, the deadline was extended by the government — check the latest notification.

BEN-2

The reporting company must file BEN-2 within 30 days of receiving the BEN-1 from the SBO. If the company receives BEN-1 on 15 January, BEN-2 is due by 14 February.

If the SBO changes (a new shareholder takes the chain), the SBO files a fresh BEN-1, and the company files a fresh BEN-2 within 30 days.

The Common Triggers

Trigger 1 — Initial disclosure

When the regime first applied (in 2019), every company had to identify its SBOs and file BEN-2. The deadline was 30 days from the date the company received BEN-1.

Trigger 2 — Change in ownership chain

A company acquires shares in another company, or an existing shareholder transfers shares to a new entity. The SBO may change. BEN-1 and BEN-2 are filed.

Trigger 3 — Trust as shareholder

If a Trust (private family trust) holds shares in a company, the trustee is treated as the SBO (unless the beneficiaries have specific control). The trustee files BEN-1.

Trigger 4 — Foreign entity in the chain

If a foreign entity holds shares in the reporting company (directly or through an Indian entity), the natural person who ultimately controls the foreign entity is the SBO. The SBO files BEN-1.

Trigger 5 — Multiple natural persons through multiple entities

For a holding structure where Mr X holds 40% through entity A, 30% through entity B, and 25% through entity C, Mr X’s effective holding is 95% (40% + 30% + 25% = 95%, ignoring any cross-holdings). Mr X is the SBO.

Common Mistakes

Mistake 1 — Missing BEN-2 filing

The reporting company is responsible for filing BEN-2. If the company has not received BEN-1 from the SBO, the company should request it. The MCA portal does not allow BEN-2 without a corresponding BEN-1 reference.

Mistake 2 — Outdated BEN-2

If the SBO has changed (new shareholder, new beneficial owner), BEN-2 must be re-filed with the updated details. A stale BEN-2 is a defect.

Mistake 3 — Trust treated as SBO

The Trust itself is not the SBO — the natural person who controls the Trust (typically the trustee or the settlor) is. Misidentifying the Trust as the SBO is a defect.

Mistake 4 — Foreign SBO without PAN

A foreign national without a PAN cannot file BEN-1 through the MCA portal. The BEN-1 is filed manually with the RoC and attached to the company’s BEN-2.

Mistake 5 — Family arrangement not disclosed

A family arrangement where one member holds the shares for the benefit of another is a “significant influence” arrangement. The beneficial owner must file BEN-1. Non-disclosure is a defect.

The Penalties

Under Section 90(11) of the Companies Act, failure to file BEN-1 or BEN-2 is punishable with:

• Fine up to ₹50,000 on the SBO (for non-filing of BEN-1).
• Fine up to ₹50,000 on the company (for non-filing of BEN-2).
• Additional fine of up to ₹1,000 per day for continued default.
• The SBO may be prosecuted under Section 90(12) — imprisonment up to 1 year, or fine up to ₹10 lakh, or both.

In practice, the penalties are imposed after a notice from the RoC. The typical penalty is the minimum amount (₹50,000 for the first default, ₹1,000 per day thereafter).

When to Get Help

If your company has a layered holding structure (especially cross-border), the SBO identification is complex. A company secretary or a CA-led team typically handles BEN-1 and BEN-2.

We routinely handle BEN-2 filings for clients with simple and complex holding structures. Our annual compliance service covers BEN-2 as part of the annual return preparation. Share your company CIN and your holding structure on WhatsApp for a no-charge assessment.

For the related annual return filings, see our Annual ROC filing guide. For the related KYC obligations of directors, see our Director KYC (DIR-3 KYC) guide.

Sources

• MCA — Form BEN-1, Form BEN-2
• Companies Act, 2013 — Section 90
• Companies (Significant Beneficial Owners) Rules, 2018