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Registered Owner vs.

Beneficial Owner
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Background
1.0The concept of beneficial ownership refers to having
a beneficial interest in any property, goods including
securities. Beneficial interest usually is a "profit, benefit
or advantage resulting from a contract, or the ownership
of an estate as distinct from the legal ownership or
control." A beneficial interest is different from the rights
of someone like a trustee or an official who has the
responsibility to perform and/or title to the assets but
does not share in the benefits.
This article deals with the concept of beneficial owner
and registered owner of shares of a company.

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2.0 The meaning of the two words: Registered Owner and Beneficial Owner:
(a)Registered owner - A person whose name is registered in the Register of Members as the
holder of shares in that company but who does not hold the beneficial interest in such shares is
commonly called as the registered owner of the shares.
(b)Beneficial/Legal owner - a person who actually holds the beneficial interest in the shares but
whose name is not registered in the Register of Members is commonly called as the beneficial
owner/legal owner.
Relevant provisions
3.1 Provisions of sections 89 and 187
3.1.1 Section 89:
Under the Companies Act, 2013 ("Act") section 89 requires making of declaration in the event if
the registered owner and the beneficial owner of shares held in company are two different
persons.
For acquiring membership by such entities (for example: partnership firm, Hindu Undivided
Family ('HUFs'), etc) who are not allowed to hold shares directly of a company.
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First proviso to section 187:
3.1.2 The first proviso to section 187 allows a holding company to hold the shares of its whollyowned subsidiary in the name of nominees, other than in its own name for the purpose of
meeting the minimum number of members as per the Act.
To satisfy the requirement of minimum number of members (i.e.) 2 (Two) in case of a private
limited company and 7 (Seven) in case of a public limited company
To incorporate or to have a wholly owned subsidiary.
This article endeavors to cover the issues related with the rights of a beneficial owner and
registered owner.
3.2 Details of Provisions of Section 89 and Section 187
3.2.1 Section 89
3.2.1.1 Mandatory Declarations to be made:
Section 89, read with rule 9 of the Companies (Management and Administration) Rules, 2014
deals with declaration of beneficial interest in the shares held. It generally includes following
three steps:
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The person or a company (as the case may be), who holds the beneficial interest in any
share shall submit the declaration in Form MGT 4 along with the covering or request letter to
the company in which they hold the beneficial interest within thirty days from the date of
acquisition or change in beneficial interest.
The person or the company (as the case may be), whose name is to be entered into the
register of members of the company shall submit the declaration in Form MGT 5 within thirty
days from the date of acquisition or change in beneficial interest to the company
On receipt of declaration in Forms MGT 4 & 5 by the company, the same shall be placed
before the board for approval. The company shall also intimate to the Registrar of Companies
('ROC') in e-Form MGT 6 within thirty days from the date of receipt of declaration in Forms MGT
4 & 5.
The basic intent behind the above section is to reveal the identity of the beneficial owner
which is unknown to the company.

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