A recent penalty imposed by the Registrar of Companies (RoC) on a US private equity firm for failing to disclose ownership in an Indian investee company underscores the critical importance of getting Significant Beneficial Owner (SBO) disclosures right. This case highlights a global trend towards increased transparency and stricter regulations around corporate ownership.

Who is an SBO?

A Significant Beneficial Owner or SBO refers to an individual who holds substantial control or ownership over a company. The concept and specific criteria for identifying an SBO can vary by jurisdiction, but generally, it involves one or more of the following:

Ownership of Shares: An individual who directly or indirectly holds a significant percentage of the shares in a company. This threshold can vary but is often set at 10% or more of the company’s share capital.

Voting Rights: An individual who holds or controls a significant percentage of the voting rights in a company. Similar to ownership of shares, this threshold is typically set at 10% or more.

Control Over Appointments: An individual who has the right to appoint or remove a majority of the board of directors.

Significant Influence or Control: An individual who has significant influence or control over the company, regardless of shareholding. This can include the ability to make decisions about the company’s operations, policies, and significant transactions.

Transparency Builds Trust

Disclosing SBOs offers a multitude of benefits:

• Combating Financial Crime: Anonymous ownership structures can be a breeding ground for money laundering and other illegal activities. SBO disclosure helps authorities identify the true owners behind companies, making it harder to hide illicit activities.
• Enhanced Corporate Governance: Transparency in ownership fosters better corporate governance. Investors can make informed decisions with a clear picture of who controls the company, while stakeholders can hold management accountable.
• Reduced Risk in Business Dealings: Knowing your business partners is essential. SBO disclosure helps companies identify potential conflicts of interest or hidden risks associated with partners before entering into deals.

A Global Push for Transparency: Regulations Tighten

Governments worldwide are tightening regulations around SBO disclosure. This reflects a growing recognition of the risks associated with opaque ownership structures and a commitment to fostering a more transparent global financial system.

India’s Stance on SBO Disclosure

India’s Companies Act, like similar regulations in many other countries, mandates companies to disclose SBOs. This includes individuals who hold a minimum ownership stake or wield control, even through indirect means. This means even complex ownership structures involving foreign investors need careful consideration. The RoC is actively scrutinising filings, including documents submitted to foreign authorities, to ensure compliance.

The Price of Non-Compliance

Companies, directors, and individuals who qualify as SBOs but are not disclosed can all face significant penalties for non-compliance. The recent RoC case serves as a stark reminder. With increased scrutiny, the risk of getting caught and facing hefty fines is on the rise, causing reputational damage and hindering the ability to conduct business overseas.

How Rubix can help in SBO Compliance

At Rubix Data Sciences, we understand the complexities of navigating SBO disclosure in today’s globalised business environment. That’s why we offer a comprehensive solution: Rubix Ultimate Beneficial Owner (UBO) reports.

A UBO is a broader term encompassing the person or entity who ultimately controls a company, even if ownership is obscured through layers of subsidiaries or trusts. SBO regulations are essentially a way to identify UBOs within a specific jurisdiction.

What is a UBO?

The Ultimate Beneficial Owner (UBO) is a natural or legal person who ultimately owns or controls an entity. According to the Financial Action Task Force (FATF), a UBO is someone who exercises ultimate effective control over a legal person or arrangement. Typically, this means owning more than 10% of a company’s shares or controlling more than 10% of its voting rights, thereby having significant influence over the company’s actions and decisions.

Disclosing UBOs is mandated to ensure transparency and combat financial crimes like money laundering and terrorism financing. Identifying UBOs facilitates risk assessment, enhances due diligence, and promotes corporate governance by ensuring transparency and accountability over individuals with significant control and influence within a company.

Rubix UBO Reports: Your Compliance Partner

• Detailed Ownership Analysis: We meticulously analyse company filings, public records, and news sources to provide a thorough examination of the chain of ownership, ensuring all direct and indirect owners are identified.
• Accurate UBO Identification: We pinpoint the ultimate beneficial owners who hold significant shares or control, helping you stay compliant with regulatory requirements.
• Risk Assessment: Our reports help in assessing the risks associated with each beneficial owner, allowing for better decision-making and risk management.
• Enhanced Due Diligence: With Rubix UBO reports, you can conduct enhanced due diligence, making your business dealings more secure and transparent.
• Customised Solutions: Tailored to meet the specific needs of your business, our reports are designed to help you navigate the complexities of SBO and UBO disclosure with ease. We translate complex data into clear, concise reports that empower you to make informed decisions.
• Global Reach: Our team has expertise in navigating regulations and accessing data sources worldwide.

Don’t Wait Until It’s Too Late

Proactive identification of UBOs and SBOs is essential for Indian banks, financial institutions, and companies. With Rubix UBO Reports, you gain the tools and expertise you need to confidently identify UBOs and SBOs. Contact Rubix Data Sciences today to learn more about how we can empower your business to thrive in an increasingly transparent world.

Email: info@rubixds.com

Call: +91-22-49744274