Harsh Private Ltd. holds 50% of total shares of Spandan Ltd. A, B, and C holds 10%, 20% and 30% shares of Harsh Private Ltd. Discuss the procedural formalities required to be complied with by A, B and C with respect to t

Provisions of the Companies Act, 2013: As per Section 90 of the Companies Act, 2013 read with Rule 2(1)(h) of the Companies (Significant Beneficial Owners) Rules, 2018 , a Significant Beneficial Owner (SBO) in relation to a reporting company means an individual who, acting alone or together, or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting company, namely: holds indirectly, or together with any direct holdings, not less than 10% of the shares; holds indirectly, or together with any direct holdings, not less than 10% of the voting rights in the shares; has right to receive or participate in not less than 10% of the total distributable dividend, or any other distribution, in a financial year through indirect holdings alone, or together with any direct holdings; has right to exercise, or actually exercises, significant influence or control, in any manner other than through direct-holdings alone. Further, Explanation III to Rule 2(1)(h) states that for the purpose of definition of SBO, where the member of the reporting company is a body corporate (whether incorporated or registered in India or abroad), other than a limited liability partnership, then, an individual shall be considered to hold a right or entitlement indirectly in the reporting company, only if he holds a majority stake in that member; or if he holds a majority stake in the ultimate holding company (whether incorporated or registered in India or abroad) of that member. As per Rule 2(1)(d) of the SBO Rules, 2018 , "majority stake" means: holding more than one-half of the equity share capital in the body corporate; or holding more than one-half of the voting rights in the body corporate; or having the right to receive or participate in more than one-half of the distributable dividend or any other distribution by the body corporate. Application to the given case: In this case, Harsh Private Ltd. holds 50% of total shares of Spandan Ltd. A, B, and C hold 10%, 20%, and 30% shares of Harsh Private Ltd. respectively. We need to determine if A, B, or C are SBOs of Spandan Ltd. through their indirect holding via Harsh Private Ltd. Criteria to be verified: Whether any Individual is holding majority stake in Harsh Pvt. Ltd. (Being the body corporate, which is the member of Reporting Company i.e., Spandan Ltd): NO, since neither of A, B or C is holding more than one-half of the Equity share capital or more than one-half of the voting rights of Harsh Pvt. Ltd. Individually, A (10%), B (20%), and C (30%) do not hold a majority stake (more than 50%) in Harsh Private Ltd. Whether any Individual is holding majority stake in the Ultimate holding company of Harsh Pvt. Ltd. (Being the body corporate, which is the member of Reporting Company i.e., Spandan Ltd.): NO, since Harsh Ltd. does not appear to be having any holding or ultimate holding company. Since 60% (10%+20%+30%) of the shares of Harsh Pvt. Ltd. are held by individuals, Harsh Pvt. Ltd. cannot be a subsidiary of any other company under Section 2(87)(ii) of the Companies Act, 2013. Further, assuming that no other body corporate controls the composition of the Board of Directors of Harsh Pvt. Ltd., it can be said that Harsh Pvt. Ltd. is not a subsidiary of any other body corporate under Section 2(87)(i) as well. Conclusion: Therefore, neither A, B, nor C could be said to be the SBO in respect of the 50% shares of Spandan Ltd. held by them indirectly (through Harsh Private Limited), as none of them individually hold a majority stake in Harsh Private Ltd. and Harsh Private Ltd. itself is not a subsidiary of another company. Thus, no procedural formalities for SBO reporting would be required from A, B, or C in this specific scenario.