Four businesses penalized in last 2 weeks for lapses in reporting beneficial ownership

New Delhi: Registrars of companies have issued penalty orders against four businesses and some of their officials over the last two weeks for alleged lapses in reporting significant beneficial ownership.

With the latest orders, RoCs have adjudicated on as many as 24 cases of alleged lapses in reporting significant beneficial ownership since the beginning of May.

The latest penalty orders were issued against an appliance maker, an auto component producer, a real estate firm, and a biotech company. This shows that authorities have prioritized enforcement of compliance with sections 89 and 90 of the Companies Act, which deal with disclosure of significant beneficial ownership in companies.

The RoC for Maharashtra has imposed a penalty of ₹500,000 on Cooper Corp. Pvt. Ltd for alleged delay in reporting significant beneficial ownership. The company reported a change in significant beneficial ownership in December 2023 although it was required to do so within 30 days of receiving a declaration from the beneficial owners in June 2020.. 

One of the shareholders, who also holds a position in the company, and its company secretary have also been asked to pay ₹100,000 in penalty. The company told the RoC the delay was on account of the covid pandemic and the lockdown. RoC order described the penalties as “commensurate with the failure.” The parties have two months to appeal against the order.

The RoC for Maharashtra has also penalized Indus Biotech Pvt. Ltd with ₹500,000. Although the company had received the declarations in 2019, it reported the change in beneficial owners in April 2024. Three officials were also penalized ₹100,000 each. The company informed the RoC that the delay was “inadvertent”.

Noida-based Cuckoo Appliances Pvt. Ltd was imposed a penalty of ₹500,000, along with varying penalties on five former company executives, for alleged delays in reporting changes in significant beneficial ownership, showed an order from RoC for Uttar Pradesh.

Another Bengaluru-based company came clean about its 47-day delay in reporting the beneficial ownership change. The RoC asked the business to pay ₹1,23,000 in penalty, although the maximum penalty could have been higher, according to an order from the Karnataka RoC.

Requests for comments emailed to the companies remained unanswered at the time of publishing. 

“The increasing number of adjudicatory orders under section 89 and 90 of the Companies Act have indeed created more awareness among businesses about the need to pay special attention on compliance. The complexity of corporate structure sometimes comes in the way of meeting the reporting obligation,” said Ankit Singhi, head, corporate affairs and compliance at Corporate Professionals, a consulting firm. 

The authorities have been paying special attention to transparency in corporate ownership even as the Financial Action Task Force (FATF), a global agency that develops policies to combat money laundering and terrorism finance, placed India in the ‘regular follow up category’ in June after an evaluation, a distinction shared only by four G20 nations. 

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