Clear meaning of Beneficial Right u/s 187C of Co.Act 1956

CS Usha Nimesh (Querist) 27 July 2011 This query is : Resolved
Under section 187C there is a provision for a registered shareholder to transfer its beneficial right to a Nominee, but what are the right which have been covered under this terms?
Do that nominee:
1. attend meeting and vote
2. get dividend or bonus on such shares
3. can transfer such shares or register sh-holder can transfer shares without getting approval of nominee

Please reply
Regards
usha

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CS Usha Nimesh (Querist) 28 July 2011
???..no reply yet..friends i need your valuable opinion..specially from experts..

DEFENSE ADVOCATE.-firmaction@g (Expert) 28 July 2011
People are too busy in trifles and so no serious answers are found for such querries.

Madam to understand the implications of 187 C you have to also read the next 187 D , both together gives the concept of beneficial holder .

Payment of dividend will be covered u/s 206 as explained in the section it self.

The important objective of this provision is the transparancy of holdings , terms of beneficial interest can be decided as provided in articles and memorandum.

M V Gupta (Expert) 28 July 2011
Sec 187C does not speak of transfer of shares as mentioned in ur query. The section requires a person who is holding shares for the benefit of another to furnish a declaration to the Company. In spite of such declaration the registered holder can attend the meetings of the share holders and vote and also get the dividends in the normal course. Of course he will have to account for the dividends to the beneficial owner as per the understanding between them. Any transfer of the shares would be subject to the rights of the beneficial owner. The beneficial owner can always exercise his rights even against the buyer with notice of the beneficial rights vested in the owner.

DEFENSE ADVOCATE.-firmaction@g (Expert) 28 July 2011
These provisions are made when shares are pledged by the promoters and to be seen from that perspective so that public has knowledge of actual ownership.

CS Usha Nimesh (Querist) 02 August 2011
Thanks to Mr. JSKN and Mr. M.V.Gupta for their valuable opinion

CS Usha Nimesh (Querist) 02 August 2011
Sir please clear my doubt as we use this declaration u/s 187C to make a Wholly owned subsidiary(WOS), but as u said that registered shareholder has a right to sell share on which even he had transferred beneficial right.
So in case of WOS if one shareholder (nominated by co.) sell his one share the pricipal company will loss its WOS status than what are the safeguard that co. can have...please tell

M V Gupta (Expert) 02 August 2011
To form a company there must be minimum of two share holders. Hence corporates promote WOS by contributing for 99.99% of the shares and nominate one of their own Officers to hold the balance shares. The Company may enter into MOU or obtain an undertaking spelling out the obligations of the nominee share holder by which he would be bound. This coupled with the declaration filed by the Nominee share holder under Sec 187C should adequately safeguard the interests of the Promoter Company.