Unmasking Corporate Shadows: The Designated Person Notification

In the labyrinth of corporate governance, transparency is the elusive holy grail. The Ministry of Corporate Affairs (MCA) in India has taken a significant step towards unmasking the shadows of beneficial ownership with its recent notification. Effective October 27, 2023, every company must designate a person responsible for providing information on beneficial ownership to the Registrar of Companies (RoC). This move is a bold attempt to curb the misuse of corporate structures for illegal activities such as money laundering and tax evasion. But is it enough to truly hold companies accountable?

The notification mandates that companies appoint a designated person who can be a company secretary, key managerial personnel (KMP), or a director. This person will serve as the point of contact for regulatory authorities, ensuring that beneficial ownership information is accurately reported and maintained. The details of this designated person must be included in the company’s annual return, and any changes must be communicated to the RoC through Form GNL-2. This requirement is aimed at enhancing transparency and accountability in corporate governance.



However, the implementation of this new requirement is not without its challenges. Companies, especially smaller ones, may face a significant compliance burden. The process of designating a person, holding board meetings, filing forms, and ensuring continuous compliance can be time-consuming and resource-intensive. Moreover, the risk of non-compliance is high, with potential penalties and legal consequences looming large.

The maritime industry’s approach to safety management under the ISM Code offers valuable lessons for companies in this regard. The Designated Person Ashore (DPA) under the ISM Code is responsible for ensuring compliance with safety management systems, conducting audits, and investigating incidents. The DPA’s role is broader and includes overseeing safety management systems, conducting audits, and ensuring compliance with international regulations. The DPA requires specialized training and qualifications to effectively perform their role. This emphasis on specialized training and comprehensive compliance management can be a valuable lesson for companies in the context of beneficial ownership reporting.

The maritime industry’s approach to safety management, which includes audits, incident investigations, and continuous improvement, can be adapted to the reporting of beneficial ownership. Companies can benefit from implementing similar comprehensive compliance management systems to ensure accurate and timely reporting. The DPA’s role in maintaining communication and reporting incidents can be applied to the role of the designated person for beneficial ownership. Establishing clear communication channels and regular reporting mechanisms can help ensure compliance and transparency.



The notification is a positive step towards greater transparency and accountability in Indian companies. It states, "The amended rules are a positive step towards greater transparency and accountability in Indian companies. Responsible reporting of beneficial interests will also improve India’s compliance with global anti-money laundering standards." This highlights the broader impact of the amendment on the company's compliance with international standards, further reinforcing the importance of transparency and accountability in corporate governance.

However, the true test of this notification will be in its implementation. Companies must ensure that the designated person is properly trained and aware of their responsibilities. They must also allocate adequate resources to support the designated person in their role. Regular audits and reviews, along with legal and compliance support, can help mitigate the risk of non-compliance and the associated penalties.

In conclusion, the appointment of a designated person for reporting beneficial ownership in companies is a significant step towards enhancing transparency and accountability in corporate governance. While the implementation of this requirement presents challenges, the lessons from the maritime industry’s approach to safety management offer valuable insights. Companies must ensure that they are fully compliant with the new requirements and that the designated person is equipped to fulfill their responsibilities effectively. Only then can we truly unmask the shadows of corporate governance and hold companies accountable for their actions.