Under the Prevention of Money Laundering Act (PMLA) and SEBI guidelines, what ownership or entitlement threshold identifies an Ultimate Beneficial Owner (UBO) for a non-individual investing company versus a partnership firm?

[ A ]Ownership of more than 90% for a company, and 100% for a partnership firm

[ B ]Controlling ownership interest of more than 25% of shares/profits for a company, and more than 15% of property/profits for a partnership firm[ CORRECT ]

[ C ]Holding at least 1 equity share in a listed public company

[ D ]Holding an active corporate credit card issued in the company's trade name

Takeaway

Option B is correct: Controlling ownership interest of more than 25% of shares/profits for a company, and more than 15% of property/profits for a partnership firm

Derivation

Under SEBI Client Due Diligence guidelines under PMLA, institutional investors (other than listed companies and their majority subsidiaries) must declare their Ultimate Beneficial Owners (UBOs). An UBO is the natural person who ultimately owns or controls the entity: (1) For companies: natural persons holding >25% of shares, capital, or profits, (2) For partnerships, trusts, and unincorporated associations: natural persons holding >15% of capital or profits. Proof of identity for each UBO must be submitted. This tests anti-money laundering compliance. The common error is confusing the 25% corporate threshold with the 15% partnership threshold.

Why the others fail

A — Ownership of more than 90% for a company, and 100% for a partnership firm

90% is excessively high; international AML and SEBI standards capture controlling interests starting at >25% for companies and >15% for partnerships.

C — Holding at least 1 equity share in a listed public company

Holding 1 share in a listed company does not constitute controlling beneficial ownership under UBO due diligence rules.

D — Holding an active corporate credit card issued in the company's trade name

Possessing a corporate credit card is an operational banking feature and does not establish beneficial equity ownership under PMLA.