# Form BEN-2 and Significant Beneficial Ownership – A Complete Guide

Published: 15 Sep 2026
Author: Treelife
Practice area: Compliance
Tags: BEN-2 filing, Form BEN-1 BEN-2 BEN-3 BEN-4, indirect shareholding significant beneficial owner, MCA V3 portal BEN-2 form, offshore holding structure SBO India, SBO compliance for startups, Section 90 Companies Act 2013, significant beneficial owner India
Source: https://treelife.in/compliance/form-ben-2-and-significant-beneficial-ownership/

## Summary

- Form BEN-2 is the return an Indian reporting company files with the Registrar of Companies to disclose its significant beneficial owner (SBO) under Section 90 of the Companies Act, 2013.
- Section 90 requires identification of any individual who, directly or indirectly, holds at least 10 percent of shares, voting rights, or distributable dividend, or who exercises significant control, even where ownership is layered through Mauritius, Singapore, or Cayman entities.
- Where a shareholder is an offshore entity, the company must trace majority stake through each intermediate layer until a natural person is identified, and must file Form BEN-2 within 30 days of receiving that person's BEN-1 under Rule 4 of the Companies (Significant Beneficial Owners) Rules, 2018.
- The SBO regime was introduced by the Companies (Amendment) Act, 2017, which inserted the current Section 90, and was operationalised via the Companies (Significant Beneficial Owners) Rules, 2018, effective 13 June 2018 and substantially revised on 8 February 2019.
- The 10 percent SBO threshold under Rule 2(1)(h) of the SBO Rules is assessed on a combined direct-plus-indirect basis, not on the indirect holding alone.
- Section 90(4A) imposes a positive, ongoing duty on every reporting company to proactively identify its SBOs, rather than merely accept voluntary disclosures.
- The regime aligns India's corporate transparency framework with FATF Recommendation 24 on beneficial ownership, a factor cited for tighter enforcement as India's corporate registry has matured.
- The compliance obligation to identify and name the ultimate natural person rests with the Indian subsidiary itself, regardless of how many offshore layers separate it from that individual.
- Getting the legal analysis of SBO status wrong carries greater penalty exposure than procedural errors in the BEN-2 filing itself, making correct tracing through holding companies, funds, or trusts critical.

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Blog Content Overview

- [0.1 Who has to file Form BEN-2 for an Indian subsidiary with an offshore parent](#Who_has_to_file_Form_BEN-2_for_an_Indian_subsidiary_with_an_offshore_parent)

- [1 What is significant beneficial ownership under the Companies Act, 2013?](#What_is_significant_beneficial_ownership_under_the_Companies_Act_2013)
[1.1 What are the criteria to identify a significant beneficial owner?](#What_are_the_criteria_to_identify_a_significant_beneficial_owner)

- [2 How do you trace an SBO through a layered offshore holding structure?](#How_do_you_trace_an_SBO_through_a_layered_offshore_holding_structure)
[2.1 A worked example: three offshore layers above an Indian subsidiary](#A_worked_example_three_offshore_layers_above_an_Indian_subsidiary)
[2.1.1 Unsure exactly where your layered offshore SBO chain lands?
Let’s Talk](#Unsure_exactly_where_your_layered_offshore_SBO_chain_lands_Let8217s_Talk)

- [3 What are BEN-1, BEN-2, BEN-3, and BEN-4, and who files each one?](#What_are_BEN-1_BEN-2_BEN-3_and_BEN-4_and_who_files_each_one)
- [4 What is the process and timeline for filing Form BEN-2?](#What_is_the_process_and_timeline_for_filing_Form_BEN-2)
- [5 What changed in Form BEN-2 after the July 2024 amendment?](#What_changed_in_Form_BEN-2_after_the_July_2024_amendment)
- [6 What are the penalties for not filing Form BEN-2 or not identifying an SBO?](#What_are_the_penalties_for_not_filing_Form_BEN-2_or_not_identifying_an_SBO)
- [7 Which companies are exempt from BEN-2 filing?](#Which_companies_are_exempt_from_BEN-2_filing)
[7.1 Does the Companies Compliance Facilitation Scheme, 2026 offer any relief for an unfiled BEN-2?](#Does_the_Companies_Compliance_Facilitation_Scheme_2026_offer_any_relief_for_an_unfiled_BEN-2)

- [8 Common mistakes that cost founders time and money](#Common_mistakes_that_cost_founders_time_and_money)
- [9 Treelife’s practitioner note on layered SBO chains](#Treelife8217s_practitioner_note_on_layered_SBO_chains)
- [10 FAQ’s on Form BEN-2 and Significant Beneficial Ownership](#FAQ8217s_on_Form_BEN-2_and_Significant_Beneficial_Ownership)

Form BEN-2 is the return an Indian company files with the Registrar of Companies to disclose the significant beneficial owner (SBO) behind its shareholding, and it is one of the few Companies Act filings where getting the legal analysis wrong costs more than getting the paperwork wrong. For a subsidiary with a single Indian promoter, the SBO is usually obvious. For a subsidiary held through a Mauritius or Singapore holding company, an offshore fund, or a family trust sitting two or three layers above the cap table, identifying the SBO means tracing majority stake through each intermediate entity until a natural person is reached. This guide sets out the Section 90 test, the mechanics of tracing SBOs through layered offshore ownership, the current BEN-2 filing process on the V3 portal, and the penalty exposure if the exercise is skipped or done wrong.

### Who has to file Form BEN-2 for an Indian subsidiary with an offshore parent

Every reporting company under Section 90, including a [wholly owned Indian subsidiary](https://treelife.in/legal/setting-up-a-wholly-owned-subsidiary-in-india/) of a foreign parent, must identify any individual holding, directly or indirectly, at least 10 percent of shares, voting rights, or distributable dividend, or exercising significant control. Where the shareholder is a Mauritius, Singapore, or Cayman entity, the company must trace majority stake at each layer until it reaches the natural person, then file Form BEN-2 within 30 days of receiving that person’s BEN-1 (Section 90, read with Rule 4, Companies (Significant Beneficial Owners) Rules, 2018).

## What is significant beneficial ownership under the Companies Act, 2013?

Significant beneficial ownership is a legal test that looks past the registered shareholder to the natural person who actually holds or controls the economic and voting interest in a company. It was introduced by the Companies (Amendment) Act, 2017, which inserted the current Section 90, and operationalised through the Companies (Significant Beneficial Owners) Rules, 2018, notified with effect from 13 June 2018 and substantially revised on 8 February 2019. The regime also aligns India with FATF Recommendation 24 on beneficial ownership transparency, part of why enforcement has tightened as India’s corporate registry has matured.

A shareholder register only shows who owns the shares in law. It does not show who benefits from them or who directs the votes, particularly when shares are routed through holding companies, trusts, or nominee arrangements. Section 90(4A) casts a positive duty on every reporting company to find out if there is an SBO in relation to it, not merely to wait for a voluntary disclosure.

This matters more for a company with layered offshore ownership than for one with a single Indian promoter, because the compliance burden sits with the Indian subsidiary regardless of where the ownership chain physically resides. An Indian company cannot tell its Registrar that the ultimate individual is somewhere in a Cayman fund structure and stop there. It has to name that individual.

### What are the criteria to identify a significant beneficial owner?

An individual is a significant beneficial owner of a reporting company if, acting alone or with others, they hold indirectly, or together with any direct holding, not less than 10 percent of the shares, not less than 10 percent of the voting rights, or the right to receive not less than 10 percent of total distributable dividend in a financial year, or if they exercise significant influence or control other than through direct holdings alone (Rule 2(1)(h), Companies (Significant Beneficial Owners) Rules, 2018). Merely holding shares directly in one’s own name does not, on its own, make a person an SBO under this test.

Two things follow from this definition that founders and finance teams routinely miss.

First, the 10 percent threshold applies on a combined direct plus indirect basis, not the indirect leg alone. If an individual holds 4 percent directly and, through an offshore structure, is attributed another 8 percent indirectly, they cross the 10 percent line and become an SBO.

First Explanation to Rule 2(1)(h) also clarifies that if an individual holds no indirect right or entitlement at all, they are not an SBO purely by virtue of a direct holding, however large. That is a different question from beneficial interest under Section 89, which deals with a registered owner holding shares on behalf of someone else, disclosed in Form MGT-6, not Form BEN-2. The two are often confused in a layered structure because both can apply to the same shares. A nominee shareholder holding legal title for an offshore investor triggers Section 89 disclosure of the registered-versus-beneficial split. Section 90 asks a further question, which natural person ultimately sits at the top of the ownership or control chain, regardless of whose name is on the register. A clean Section 89 filing is not a substitute for a Section 90 SBO declaration.

Second, “significant influence or control” is a standalone limb, independent of the 10 percent test. An individual with board nomination rights, veto rights over key decisions, or the practical ability to direct financial and operating policy can be an SBO even at a lower shareholding, because control does not require ownership.

## How do you trace an SBO through a layered offshore holding structure?

You trace an SBO through a layered structure by applying the indirect holding rule separately at each layer, using the specific attribution test for that type of entity, until every chain either terminates in a natural person or falls below the 10 percent and control thresholds. The Companies (Significant Beneficial Owners) Rules, 2018 prescribe a different attribution rule depending on whether the member above the Indian company is a body corporate, a [Hindu Undivided Family (HUF)](https://treelife.in/legal/family-offices-in-india/), a partnership entity, a trust, or a pooled investment vehicle.

This is the step most competing guides skip, and it is the step that matters for an Indian subsidiary with a foreign holding company, an offshore fund, or a trust above it. Under Rule 2A, wherever a member of the reporting company (other than an individual) holds 10 percent or more of shares, voting rights, or dividend entitlement, the company must issue that member a notice in Form BEN-4 and apply the following attribution logic to identify the natural person behind it.

**Indirect holding attribution by entity type**

Entity holding shares in the Indian companyWho is deemed to indirectly hold the sharesGoverning ruleBody corporate (including a foreign holding company)An individual holding a majority stake in that body corporate, or an individual holding a majority stake in its ultimate holding company, whether incorporated in India or abroadRule 2(1)(h), read with the majority stake definition in Rule 2(1)(f)Hindu Undivided FamilyThe karta of the HUFRule 2(1)(h)Partnership entity (firm or LLP)A partner, or an individual holding a majority stake in a body corporate that is a partner, or in that body corporate’s holding companyRule 2(1)(h)Trust (through trustee)The trustee in a discretionary trust, the beneficiary in a specific trust with a determined beneficiary, and the author or settlor in a revocable trustRule 2(1)(h)Pooled investment vehicle (fund)The general partner, the investment manager, or where the investment manager is itself a body corporate or partnership entity, the individual ultimately controlling that entityRule 2(1)(h)

Majority stake is defined as holding more than one half of the equity share capital, more than one half of the voting rights, or the right to receive more than one half of the distributable dividend of the body corporate in question (Rule 2(1)(f), inserted by the Companies (Significant Beneficial Owners) Amendment Rules, 2019, notified 8 February 2019). The test runs on equity share capital and equity voting rights, not preference shares, since preference shares ordinarily carry no vote. An individual holding 60 percent of total capital but only 30 percent of the equity component, because the rest is preference capital, does not cross the majority stake threshold on the equity test and needs a separate look at any voting or control rights attached to the preference instrument itself. A person does not need to hold a majority stake at every rung. Once a body corporate itself holds 10 percent or more in the Indian company, the question becomes who holds a majority stake in that body corporate, and if that body corporate is itself held by another, the test repeats one level up until it terminates in an individual.

### A worked example: three offshore layers above an Indian subsidiary

Consider an Indian [private limited company](https://treelife.in/compliance/private-limited-vs-llp-vs-opc/) that received Series B funding through the following chain: a Mauritius fund holds 22 percent of the Indian company’s equity; the Mauritius fund is wholly owned by a Cayman Islands master fund; the Cayman master fund’s general partner is a Singapore-incorporated management company; and one individual holds 60 percent of the shares of that Singapore management company, with the remaining 40 percent split across three other individuals at 13.3 percent each.

Working through the chain: the Mauritius fund holds 22 percent of the Indian company, well above the 10 percent threshold, so the reporting company must issue it a BEN-4 notice under Rule 2A. As a pooled investment vehicle, the attribution rule looks to its general partner, the Singapore management company. Within that company, the individual holding 60 percent crosses the majority stake threshold. That individual is the SBO of the Indian subsidiary, deemed to indirectly hold 22 percent of its shares, even though they hold no direct interest in the Indian company and their name appears nowhere on its share register. The other three individuals at 13.3 percent each do not cross the majority stake line and are not SBOs on this fact pattern, though each still needs a separate check for significant influence or control if they hold board seats or veto rights.

This is the analysis an Indian subsidiary’s finance team has to complete and document before it can begin the BEN-1 and BEN-2 filing, and it is the piece most generic checklists skip because it requires looking at the foreign parent’s own capitalisation table, not just the Indian entity’s register of members.

#### 
Unsure exactly where your layered offshore SBO chain lands?
[Let’s Talk](javascript:void(0))

[

](https://calendly.com/consulttreelife/20min?utm_source=blogbannertreelife)

## What are BEN-1, BEN-2, BEN-3, and BEN-4, and who files each one?

The Companies (Significant Beneficial Owners) Rules, 2018 use four linked forms, and confusing who files which is one of the most common errors in this area.

**The four SBO forms under the Companies Act, 2013**

FormFiled byFiled withPurposeTimelineBEN-1The individual who is or becomes an SBOThe reporting companyDeclaration of significant beneficial ownership, or of any change in itWithin 90 days of the SBO Rules applying to the individual, and within 30 days of any subsequent changeBEN-2The reporting companyThe Registrar of CompaniesReturn disclosing the SBO details received under BEN-1Within 30 days of receiving the BEN-1 declarationBEN-3The reporting companyMaintained internally, open for inspectionRegister of significant beneficial ownersMaintained on an ongoing basis, no filing deadlineBEN-4The reporting companyThe suspected SBO or member holding 10 percent or moreNotice seeking information where the company believes an individual is an SBO who has not filed BEN-1, or where a member holding 10 percent or more is not an individualIssued as needed under Rule 2A and Rule 6

The company never files BEN-2 on its own initiative. It is a response document, triggered only once a BEN-1 declaration is in hand. If an offshore shareholder never files BEN-1, the company’s obligation under Rule 2A is to chase that declaration through Form BEN-4, and if the individual still does not respond, Rule 7 lets the company apply to the National Company Law Tribunal within 15 days of the notice period expiring for an order restricting the shares in question, including suspension of voting and dividend rights.

## What is the process and timeline for filing Form BEN-2?

The process runs in four stages: identify the SBO through the attribution analysis above, issue Form BEN-4 to any non-individual member holding 10 percent or more, collect the resulting Form BEN-1, and file Form BEN-2 with the Registrar within 30 days, through the MCA V3 portal. For an offshore holding chain, the sequence looks like this.

- Map the full shareholding chain above the Indian company, including every intermediate body corporate, fund, and trust, and flag where each layer crosses the 10 percent threshold at the Indian company level.

- Apply the majority stake and attribution tests at each layer to land on the natural person, or persons, who qualify as SBOs.

- Issue Form BEN-4 to the immediate shareholder and, where useful for documentation, to the identified individual directly.

- Collect Form BEN-1 from the individual, including PAN or passport number, nationality, residential address, and the full chain of intermediate entities.

- File Form BEN-2 on the V3 portal within 30 days of receiving BEN-1, with the CIN, the SBO’s particulars, the nature of interest, and the indirect holding table naming each intermediate entity.

- Digitally sign the form using the authorised director’s, manager’s, CEO’s, or CFO’s digital signature certificate, with the practising professional’s certification where required, and pay the prescribed fee.

- Update the internal BEN-3 register, kept open for inspection during business hours for a minimum of two hours on any working day the board specifies.

**Documents typically needed for a layered offshore filing**

- Board resolution authorising the filing and the designated signatory

- Form BEN-1 declarations from each identified individual

- PAN and Aadhaar, or passport, for each SBO

- Corporate documents evidencing the shareholding percentage at each layer (share certificates, capitalisation tables, fund documents)

- The company’s updated register of members and latest shareholding pattern

The filing fee for Form BEN-2 follows the standard slab under the Companies (Registration Offices and Fees) Rules, 2014, based on the reporting company’s nominal share capital, not on the number of SBOs disclosed.

**BEN-2 filing fee by nominal share capital**

Nominal share capital of the companyNormal filing feeLess than ₹1 lakh₹200₹1 lakh or more but less than ₹5 lakh₹300₹5 lakh or more but less than ₹25 lakh₹400₹25 lakh or more but less than ₹1 crore₹500₹1 crore or more₹600

Where the filing is delayed beyond the 30-day window, additional fee applies as a multiple of the normal fee, escalating with delay: one time up to 15 days, two times for 15 to 30 days, four times for 30 to 60 days, six times for 60 to 90 days, ten times for 90 to 180 days, and twelve times beyond 180 days (Companies (Registration Offices and Fees) Amendment Rules, 2022, effective 1 July 2022). Twelve times the normal fee is a modest amount next to the Section 90 penalty exposure below, which is why the additional fee schedule should not be mistaken for the real cost of a late filing.

## What changed in Form BEN-2 after the July 2024 amendment?

The Ministry of Corporate Affairs substituted the Form BEN-2 annexure under the Companies (Significant Beneficial Owners) Amendment Rules, 2024, notified on 15 July 2024 and effective the same date, aligning it with the MCA V3 e-filing portal. The revised form requires more granular disclosure of the chain of intermediate entities, rather than a single collapsed indirect holding figure, separates fields for a change in existing SBO particulars from a fresh declaration, and introduces an auto-generated SBO identification number on the V3 portal that persists across a person’s subsequent filings, along with stricter field-level validation on PAN, DIN, and passport formats.

For a subsidiary with layered offshore ownership, this is not a cosmetic change. The pre-2024 form let a company report an SBO’s indirect percentage without itemising every intermediate entity. The revised form’s structured table expects each layer named separately, meaning the Mauritius fund, the Cayman general partner, and the Singapore manager in the worked example above each need their own row rather than a single “held through offshore fund structure” line. Companies filing BEN-2 from documentation prepared before mid-2024 should revisit it before relying on it for a fresh filing.

## What are the penalties for not filing Form BEN-2 or not identifying an SBO?

Non-compliance with Section 90 carries separate penalties for the individual SBO who fails to declare and for the company and its officers who fail to identify, register, or report an SBO, structured as a base penalty plus a per-day continuing penalty subject to a cap, following the decriminalisation of these provisions by the Companies (Amendment) Act, 2020.

**Penalty structure under Section 90**

Defaulting partyBase penaltyContinuing defaultStatutory capGoverning provisionIndividual SBO who fails to file BEN-1₹50,000₹1,000 per day of continuing failure₹2,00,000Section 90(10), Companies Act, 2013Reporting company that fails to maintain the register, file BEN-2, or take steps under Section 90(4A)₹1,00,000₹500 per day of continuing failure₹5,00,000Section 90(11), Companies Act, 2013Officer of the company in default₹25,000₹200 per day of continuing failure₹1,00,000Section 90(11), Companies Act, 2013

These are civil penalties levied by the adjudicating officer or Registrar, not criminal fines requiring prosecution, part of why enforcement has become more routine. Where an individual wilfully provides false or misleading information, or conceals a material fact in a BEN-1 declaration, that conduct can additionally attract prosecution for fraud under Section 447, which carries materially higher exposure including imprisonment.

Enforcement is not theoretical. In one adjudication order, a Registrar of Companies imposed a penalty of ₹2,00,000 on a company and ₹50,000 each on its defaulting directors for failing to identify SBOs and for not filing Form BEN-2, after the company ignored repeated show cause notices. A separate, more widely reported order penalised an Indian technology subsidiary and its directors, along with the CEOs of its ultimate foreign holding entities, for failing to disclose SBOs arising from an indirect control chain, illustrating that the obligation reaches all the way up a multinational structure, not just the immediate Indian shareholders.

## Which companies are exempt from BEN-2 filing?

Rule 8 of the Companies (Significant Beneficial Owners) Rules, 2018 exempts a limited set of entities, and none apply to an ordinary Indian operating subsidiary, however it is owned.

- The Investor Education and Protection Fund Authority in respect of shares held by it

- A holding reporting company, provided its own SBO details are reported in the holding company’s Form BEN-2

- The Central Government, State Government, or a local authority

- A body corporate constituted under an Act of Parliament or a State legislature

- A SEBI-registered investment vehicle, such as a mutual fund, [alternative investment fund](https://treelife.in/services/aif-setup/), real estate investment trust, or infrastructure investment trust

- An investment vehicle regulated by the Reserve Bank of India, the Insurance Regulatory and Development Authority of India, or the Pension Fund Regulatory and Development Authority

The pooled investment vehicle exemption is narrower than it looks. It reaches only vehicles registered with, and regulated by, SEBI, the RBI, the IRDAI, or the PFRDA. It does not cover a Mauritius, Singapore, or Cayman fund merely because it is regulated somewhere offshore, which is exactly why the worked example above required full attribution through the Mauritius fund and its Cayman and Singapore layers. Treating an offshore fund as exempt because it looks like a regulated AIF is one of the more expensive misreadings of Rule 8.

The exemption for a holding reporting company only applies where that intermediate company is itself an Indian reporting company that has already disclosed the SBO in its own BEN-2. It does not extend to a foreign holding company, so a Mauritius or Singapore parent gives the Indian subsidiary no exemption at all.

Where one of the intermediate layers is an Indian LLP rather than a foreign body corporate, a parallel obligation sits on that LLP directly. The Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023, effective 9 November 2023, mirror Section 90 for LLPs, requiring it to identify its own SBO and file Form LLP BEN-1 and Form LLP BEN-2, alongside, not instead of, the Indian subsidiary’s own Section 90 exercise.

### Does the Companies Compliance Facilitation Scheme, 2026 offer any relief for an unfiled BEN-2?

No. The Companies Compliance Facilitation Scheme, 2026 (CCFS-2026), introduced through General Circular No. 01/2026 dated 24 February 2026, gives companies reduced additional fees and, in specified cases, immunity from penalty for overdue annual filings, but its scope does not extend to Form BEN-2 or any Section 90 default. It covers annual return and financial statement filings under Sections 92 and 137 (Forms MGT-7, MGT-7A, and the AOC-4 variants), along with ADT-1, FC-3, FC-4, and a set of legacy 1956 Act forms. A company sitting on an unfiled or defective BEN-2 gets no fee concession and no immunity through this scheme, and remains fully exposed to Section 90(10) and 90(11) regardless of where it stands.

The scheme’s own deadline has moved twice since it opened, from 15 July 2026 to 31 August 2026 (General Circular No. 03/2026, following disruption at the MCA21 data centre) and then to 15 September 2026 (General Circular No. 04/2026). A company relying on it for annual filings should confirm the current position with MCA directly rather than assume a fixed date, but none of this changes the position on BEN-2, since the scheme was never designed to reach Section 90.

## Common mistakes that cost founders time and money

**Treating the Indian shareholder register as the end of the analysis.** A company that stops at “our shareholder is a Mauritius entity, so there is no SBO” has not performed the Rule 2A exercise at all. The obligation is to look through the entity, not stop at it. This is the most common gap Treelife sees in subsidiaries preparing for a funding round or an IPO readiness review, and it is also where an offshore general partner or fund manager gets wrongly treated as outside Section 90’s scope, when the pooled investment vehicle rule was drafted precisely to catch that structure.

**Filing BEN-2 without the indirect holding table matching the post-2024 form.** Companies that reuse a pre-July 2024 template, or summarise a multi-layer chain into one indirect percentage instead of naming every intermediate entity, risk a defective filing that the ROC can flag, putting the company back in default even though a form was technically filed.

**Missing the significant influence or control limb because the shareholding is below 10 percent.** Board nomination rights, affirmative vote rights over budgets or key hires, and similar governance rights in a [shareholders’ agreement](https://treelife.in/legal/sha-vs-spa-vs-subscription-agreement/) can make an individual an SBO even where their combined shareholding sits below 10 percent. Reviewing the shareholders’ agreement alongside the cap table is not optional in a control-heavy investor structure.

**Letting a BEN-1 request go unanswered without escalating.** Where an identified individual does not respond to a Form BEN-4 notice within the specified time, or the information given is incomplete, Rule 7 gives the company 15 days to approach the Tribunal for restrictions on the relevant shares. Companies that wait indefinitely for a cooperative offshore investor to respond are themselves in default under Section 90(4A), regardless of the investor’s conduct.

## Treelife’s practitioner note on layered SBO chains

In the SBO engagements we have run at Treelife, the recurring pattern is not a company that refuses to comply. It is a company that assumes its offshore holding structure was already vetted for SBO purposes at the time of the funding round, when the fund’s own KYC and the Indian company’s Section 90 obligation are two separate exercises nobody reconciled. The cap table used for the funding documentation and the one used, or not used, for the SBO analysis are often different documents prepared by different teams at different times.

A pattern worth flagging for founders with [GIFT City](https://treelife.in/services/gift-ifsc-setup/) or IFSC-routed structures: an IFSCA-regulated fund is not automatically exempt from being traced as an SBO source merely because it sits in a regulated jurisdiction. As set out above, the Rule 8 exemption applies to the vehicle itself in specific circumstances, not to every individual sitting above a regulated fund’s general partner. We have seen an entire fund-of-funds chain incorrectly treated as exempt because one intermediate vehicle happened to be SEBI-registered, when the attribution test still needs to run to the individual controlling the general partner or investment manager.

We also see the FEMA downstream investment reporting a company already does for the same shareholding chain, through Form FC-GPR and the annual FLA return, conflated with the separate Section 90 exercise. The two regimes sit with different regulators on different tests, so the ownership percentages reported to the RBI should be checked against, not assumed to match, the indirect holding chain reported in BEN-2.

> Read Treelife’s guide on [FEMA compliance in India](https://treelife.in/compliance/fema-compliance-in-india/) for how the same offshore shareholding chain is reported under the foreign exchange framework alongside Section 90.

## FAQ’s on Form BEN-2 and Significant Beneficial Ownership

**Q: What is the tax treatment of an SBO declaration itself?** 
A: Filing BEN-1 or BEN-2 does not, by itself, trigger any tax event under the Income Tax Act, 1961. It is a corporate transparency filing under the Companies Act, 2013, separate from any tax residency disclosure the individual may separately owe.

**Q: How much does professional help with an SBO analysis typically cost?** 
A: Advisory fees are usually structured around the number of intermediate entities to be traced and whether the filing is fresh or a defaulted one needing remediation, since the legal analysis is the bulk of the work, not the form itself.

**Q: What is the realistic timeline from identifying an SBO to a completed filing?** 
A: Once the analysis is complete, expect two to four weeks for the individual to return BEN-1 with supporting KYC, followed by the 30-day statutory window to file BEN-2, so a well-managed case typically closes within six to eight weeks of starting.

**Q: What documentation should a company keep for an offshore SBO chain?** 
A: The BEN-1 declaration, the board resolution authorising the BEN-2 filing, the intermediate entities’ constitutional or fund documents evidencing majority stake at each layer, and the filed BEN-2 acknowledgement, all cross-referenced in the BEN-3 register.

**Q: Does a change in FEMA reporting for the same shareholding affect the SBO filing?** 
A: Not automatically. A fresh Form FC-GPR for a follow-on investment should prompt a fresh review of whether the SBO chain has changed, since a new tranche can shift majority stake at an intermediate layer, but the two filings sit with different authorities on different tests.

**Q: Do family or co-founder structuring arrangements trigger SBO obligations?** 
A: Yes. Where founder shares are held through a family trust or an HUF for succession planning, the trustee, for a discretionary trust, or the karta, for an HUF, is treated as the indirect holder, and the 10 percent test applies at the trust or HUF’s shareholding level.

**Q: Is a DPIIT-recognised startup exempt from SBO filing?** 
A: No. DPIIT recognition affects tax exemptions and certain compliance relaxations, but does not appear in the Rule 8 exemption list, so a recognised startup with a qualifying shareholder still has to file BEN-2.

**Q: What happens if the offshore investor refuses to disclose the individual behind a fund structure, or an incoming investor flags the gap during due diligence?** 
A: The company issues Form BEN-4 and, if the response is inadequate or absent within the specified time, applies to the National Company Law Tribunal within 15 days for an order restricting the shares, including suspension of voting and dividend rights, under Rule 7 read with Section 90(7). Where an incoming investor flags an unfiled or inconsistent BEN-2 during due diligence, it is usually treated as a closing condition to be remediated before or alongside closing, since the penalty exposure sits with the target company and its existing officers, not the incoming investor.

**Q: What happens to the SBO position if a deal falls through after BEN-1 is filed?** 
A: The BEN-1 and any resulting BEN-2 reflect ownership as it exists at the time of filing. If the transaction falls through before completion and no shares change hands, there is nothing further to report, but if partial completion occurred, a fresh filing reflecting the reversal would be needed.

**Q: Are ESOP holders, or an offshore fund’s SBO across multiple portfolio companies, treated any differently?** 
A: An ESOP pool held in trust is assessed like any other trust holding, looking at the trustee, and individual option holders below 10 percent, almost all of them, do not become SBOs merely by holding options. Where a fund manager or general partner controls stakes in several Indian portfolio companies, the same individual can be the SBO of each one separately, with each company filing BEN-1 and BEN-2 independently.

**Q: Does an NRI founder holding shares directly face different SBO obligations?** 
A: No. An NRI founder holding 10 percent or more, directly or through an intermediate entity, is an SBO on the same basis as a resident individual and must file BEN-1 the same way, using passport details in place of PAN where applicable.

**Regulatory references**

- Section 90, Companies Act, 2013, as amended by the Companies (Amendment) Act, 2017 and the Companies (Amendment) Act, 2020

- Companies (Significant Beneficial Owners) Rules, 2018, notified 13 June 2018

- Companies (Significant Beneficial Owners) Amendment Rules, 2019, notified 8 February 2019

- Companies (Significant Beneficial Owners) Amendment Rules, 2024, notified 15 July 2024

- Companies (Registration Offices and Fees) Rules, 2014, and the Companies (Registration Offices and Fees) Amendment Rules, 2022, effective 1 July 2022

- Companies Compliance Facilitation Scheme, 2026 (CCFS-2026), General Circular No. 01/2026 dated 24 February 2026, extended by Circulars No. 03/2026 and 04/2026, covering Section 92 and 137 filings only, not Section 90

- Limited Liability Partnership (Significant Beneficial Owners) Rules, 2023, effective 9 November 2023, for any intermediate Indian LLP in the holding chain

**External sources**

- [Ministry of Corporate Affairs](https://www.mca.gov.in)

- [e-Gazette of India](https://egazette.gov.in)

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