Every change in the business environment in India calls for the importance of conformity to the regulatory framework for good governance and operational transparency. The Ministry of Corporate Affairs (MCA) requires certain companies to institute event-based filings in terms of the above regulatory mechanism. This means that whenever a material corporate event or alteration occurs in the company, relevant forms and documents are filed through the MCA portal. Whereas annual compliance is governed by a specific calendar, event-based compliance is triggered at different times in an organisation’s life, such as a change in a director, a change in share capital, a change in registered office address, or a share issue, among others.
It is of utmost importance that the filing be done timely and accurately. Non-compliance may lead to penalties, litigation, and the disqualification of directors. The Companies Act, 2013, and rules and regulations made thereunder require companies to notify such changes to the Registrar of Companies (ROC) within the stipulated timelines in order to ensure transparency in the matters at hand and the proper organisation of records.
Event-based MCA filings give support to the legal status of a company and help in raising its stature amongst its stakeholders, the investors, and the regulatory body. They show that the company is keen on compliance with regulations, professional responsibility, and a very proactive way of implementing corporate governance.
What is Form MGT-6?
It is a mandatory form under the Companies Act, 2013, which should be filed by companies against a declaration made by a shareholder who is registered for the beneficial ownership of shares. This form is for the documentation of the declaration made as per the provisions in Section 89(2) of the Act and under Rule 9(3) of the Companies (Management and Administration) Rules, 2014. In case the shares are with someone other than the registered shareholder, the registered owner will be required to notify the company using the Form MGT-4, while the beneficial owner must complete Form MGT-5. After this, the company shall file MGT-6 with the Registrar of Companies within a span of 30 days on receiving such declarations.
Form MGT-6, therefore, has as its main purpose transparent identification of the actual owners of shares that exist in the names of others for purposes of preventing fraudulent activity and fulfilling regulatory responsibilities while increasing accountability in corporate governance. Form MGT-6 becomes very important when there are shares that are held in a fiduciary capacity or in nominee arrangements. Non-compliance with the provisions of MGT-6 might result in penalties against the company and the officers involved.
What is the Meaning of ‘Beneficial Interest’?
According to the Companies Act 2013, the term beneficial interest means the rights or entitlements of a person other than the registered owner to benefit from shares. This mainly includes rights to dividends, the right to vote, and all other rights associated with those shares, even though they may be in someone else’s name by law. Section 89 of the Act exclusively deals with beneficial ownership and requires such arrangements to be disclosed.
Thus, once the declarations are received by the company from the registered owner in Form MGT-4 and the beneficial owner through Form MGT-5, it must again file the declarations with the Registrar of Companies through Form MGT-6. This filing indirectly serves to record and to portray the true ownership of shares. To promote transparency in company ownership, to prevent the misuse that may occur through proxy holdings, and to further ensure effective governing practices.
Applicability of Form MGT-6
MGT-6 should be filed by all corporations, save for exceptions, that are reporting beneficial interest in shares as laid down in Section 89(2) of the Companies Act, 2013. On declaring with respect to registered and beneficial shareholders, such corporations are required to file this form with the Registrar of Companies (ROC).
Who needs to file MGT-6?
The form must be filed by the corporation within 30 days upon receipt of the following notification:
- A registered shareholder can complete Form MGT-4 to state that their shares are held for another individual.
- The beneficial owner must fill out Form MGT-5 to disclose interest in shares registered under another person’s name.
Why is it relevant?
MGT-6 is, after all, the one that is applicable to nominees having shares on behalf of others. It can also apply in instances involving a trust, a partnership, or a group of companies where there exist multiple registered and beneficial owners. And, applicable in any instance where the person exercising rights would not agree with the name mentioned against a specific entry in the membership register of the company.
Which companies fall under this purview?
Form MGT-6 must be filed by all corporations, whether private or public, excluding those guaranteed and without share capital. Such types may sometimes be exempted from that category when so indicated by the government, although there are no exemptions at present.
Objectives and Importance
The very goal of MGT-6 is to add transparency to ownership of shares, while simultaneously removing obstacles to benami transactions and facilitating regulatory definition over the actual ownership and control of companies. This is one of the critical mechanisms for creating adherence to the norms of corporate governance.
Failure to comply with the requirements of MGT-6 will entail penalties for both the company and its officer in default as provided in Section 89(5) of the Companies Act, 2013.
Contents and Details Required to be Filled in Form MGT-6
Form MGT-6 is filed with the Registrar of Companies (ROC) to record the receipt of declarations concerning the beneficial ownership of shares. This includes receiving information from both registered shareholders and beneficial shareholders.
Noteworthy points include:
- The form should be filed within 30 days after receipt of the declarations under Forms MGT-4 and MGT-5.
- Filing should be done via the MCA21 portal by using valid credentials and a Digital Signature Certificate (DSC).
- Late fees and penalties will apply as per the Companies Act, 2013.
1. Corporate Identity Details
- Corporate Identity Number (CIN) of the company.
- Include company name, address, and e-mail address.
- Date on which the Board Resolution for the filing of the form has been passed.
2. Registered Owner (under Form MGT-4) Details
- The name of the registered shareholder.
- Provide the registered owner’s address, e-mail address, and occupation.
- If applicable, give the portfolio number, DP ID, or client ID.
- Declare the type and quantity of shares involved.
- State the date of acquisition of shares.
- Specify the face value, nominal value, and paid-up value of shares.
- Indicate the class of holding or ownership (e.g., nominee, trustee, etc.); Form MGT-4 is to be duly filled with the date of declaration.
3. Beneficial Owner Details (Form MGT-5)
- Identify the person who is a beneficial owner of shares.
- Information regarding the beneficiary, such as address, email address, and occupation, should be provided.
- Nationality and Permanent Account Number (PAN) of the beneficial owner should be given.
- Specify class and number of shares in respect of which beneficial interest is held.
- Describe why shares are held in another’s name.
- The date of declaration under Form MGT-5 must be recorded.
4. Attachments
- A copy of the declaration of the registered owner as per Form MGT-4.
- A copy of the declaration of the beneficial owner as per Form MGT-5.
- Relevant supporting documents may be attached.
5. Verification and Digital Signature
- Make the Digital Signature Certificate (DSC) of the director or the manager authorised.
- Provide the Director Identification Number (DIN) of the signatory.
- Give confirmation that the contents of the said form are correct and complete.
Filing Procedure of Form MGT-6
Proper filling up of Form MGT-6 will legally ensure compliance and go a long way in furthering transparency in the company’s shareholding scheme.
1. Securing Declarations:
The company must obtain declarations in the prescribed form of MGT-4 from the registered owner and in MGT-5 from the beneficial owner.
2. Completion of MGT-6:
All particulars must be filled out, namely, names of the registered and beneficial owners, particulars of shareholding, and the date of declaration.
3. Attachments:
- Copy of Form MGT-4
- Copy of Form MGT-5
- Additional documents to be attached, if needed.
4. Digital Signing:
The forms must be digitally signed by authorized directors or company secretaries using a Digital Signature Certificate (DSC).
5. Filing the form with MCA:
The MCA21 portal has to be accessed, the form being uploaded, followed by its online submission.
6. Payment of Filing Fees:
Pay the applicable filing fees based on the company’s authorized capital.
7. Acknowledgment:
In the case of successful submission of the application, a Service Request Number (SRN) and further acknowledgment can be generated for future references.
Fees and Due Date of Form MGT-6
Essential to file Form MGT-6 on time to avoid penalties and comply; Companies should keep track of shareholding for declarations. Filing for Form MGT-6 should be undertaken immediately following receipt of Forms MGT-4 and MGT-5.
Due date of Form MGT-6:
As Section 89(2) of the Companies Act, 2013, read with Rule 9(3) of the Companies (Management and Administration) Rules, 2014, Form MGT-6 is due within thirty days of receipt of declarations through Form MGT-4 (from the registered owner) and Form MGT-5 (from the beneficial owner). A default in filing may lead to penalties for the company and its officers.
Filing Fees for Form MGT-6 for Companies with Share Capital:
- For companies with authorised Share Capital of up to ₹1 lakh, the filing fee is ₹200.
- The fees will be ₹300 for the authorised capital from ₹1 lakh to ₹4,99,999.
- An amount of ₹400 will be applicable for companies with authorised capital from ₹5,00,000 to ₹25,00,000.
- For authorised capital from ₹25,00,000 to up to Rs. 1 Crore, the fees will be ₹500.
- For companies with authorised capital of ₹1 crore (Rs. 1,00,00,000) and above, the fees will be ₹600.
In case of a Company without Share Capital, the Filing fees will be:
- If the company has fewer than or equal to 20 members, the fee is ₹200.
- If the company has more than 20 members, the fee is ₹500.
Consequences of Non-Compliance
Failure to comply with the filing obligations of Form MGT-6 as provided under the Companies Act of 2013 may result in penal and legal sanctions for the company and its defaulting officers. Defaults occur if the company fails to file Form MGT-6 within 30 days from the declaration of Forms MGT-4 and MGT-5 as per the mandate of Section 89(2) and Rule 9(3) of the Companies (Management and Administration) Rules, 2014.
Penalties under Section 89(5):
Where a company fails to file Form MGT-6 within the designated period:
- Penalties for the Company: A fine of ₹1,000 for every day until default continues, with a maximum fine of ₹5,00,000.
- Penalties for Defaulting Officers: In case of default directors, officers, and secretaries are liable to a fine of ₹1,000 per day of default with a maximum fine of ₹2,00,000 for each officer.
Other Consequences:
- Late Fees: The Ministry of Corporate Affairs (MCA) imposes additional fines where filings are delayed, according to the number of days delayed (2 to 12 times the usual fee).
- Compliance Risks: Non-compliance can severely damage the image of the company and hurt its relations with the regulators.
- Inadequate disclosure of beneficial ownership reduces transparency and may give rise to suspicion regarding benami or proxy ownership, and could draw the attention of the regulator.
Conclusion
As such, Form MGT-6 is used for increasing transparency concerning beneficial ownership in the shareholding structure of a company. A timely and correct filing of the form would also fulfill the legal requirements and ensure good corporate governance, prevent abuse of nominee holdings, and enhance the company’s image with regulators as well as investors and other stakeholders.
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