In a move to bring about transparency, the government has notified significant beneficial owner rules in limited liability partnerships.

The rules notified by the ministry of corporate affairs mandate LLPs to report about SBOs to the registrar of companies within 30 days of the date of declaration made by an individual about holding or acquiring that status. The new rules will not be applicable to government or government-controlled entities.

Analysts said the new rules aim to increase transparency in the ownership of LLPs and make it easier to identify and track the ultimate beneficiaries of funds flowing through these entities.

They said the rules intend to ascertain the true or “beneficial” owner’s interest in and control over the contributions made by the partners and individuals to the LLP.

An SBO is an individual who has significant control or influence over an LLP, either directly or indirectly. This includes individuals who hold a significant stake in the LLP, have the right to appoint or remove directors or partners or have the right to exercise significant influence over the management or operations of the LLP.

According to the new set of rules, “Significant Beneficial Owner” in an LLP means an individual who is acting alone or together or through one or more persons or trust, possesses one or more of four rights or entitlements.

i) holds indirectly or together with any direct holdings, not less than 10 per cent of the contribution;

(ii) holds indirectly or together with any direct holdings, not less than 10 per cent of voting rights in respect of the management or policy decisions;

(iii) has the right to receive or participate in not less than 10 per cent of the total distributable profits, or any other distribution, in a financial year through indirect holdings alone or together with any direct holdings;

and (iv) has the right to exercise or actually exercise, significant influence or control, in any manner other than through direct-holdings alone.

Every reporting LLP will be required to take necessary steps to find out if there is any individual who is a significant beneficial owner.

Such an individual is required to give a declaration to the reporting LLP within 90 days from the commencement of new rules i.e., November 10.

Once received, the firm will be required to submit the information to the Registrar of Companies within 30 days from the receipt of the declaration.

The individual will also be required to inform the firm about any change in her/his status as a Significant Beneficial Owner to the LLP firm within 30 days of the change. At the same time, partners, other than individuals with holding of 10 per cent or more in total contribution and voting rights and a right to receive 10 per cent or more of dividends, will also be required to fill out a form (LLP BEN-4).

In case an individual not giving information about significant beneficial owners, the LLP can approach a tribunal. The LLP can pray for restrictions on the transfer of interest, suspension of the right to receive profits or voting rights about the contribution in question, and any other restriction on all or any of the rights attached to the contribution in question.

The notification said that new rules would not be applicable to the extent of the contribution of the reporting limited liability partnership held by the government or government-controlled entity.