The Ministry of Corporate Affairs ( MCA ) has penalised Linkedin, Satya Nadella, Ryan Roslansky and others for violating norms of Significant Beneficial Owner ( SBO ). The Registrar of Companies ( ROC ) of Delhi & Haryana has imposed a fine of Rs. 27,10,800.
The company, ‘LinkedIn India filed an e-form MGT-6 on 29.01.2024, reporting LinkedIn Technology Unlimited Company as the registered holder and LinkedIn Ireland Unlimited Company as the beneficial owner of one share. The beneficial interest was shown as created on 11.01.2024.
However, the financial statements indicated the beneficial interest arose much earlier. Additionally, the company failed to declare its significant beneficial owner as required by Section 90 of the Companies Act, 2013. Consequently, a Show Cause Notice for Adjudication was issued on 15.02.2024 to assess compliance with Sections 89 and 90.
Regarding analysis of non-compliance with Section 89 of the Companies Act, the company indicated that LinkedIn Ireland Unlimited Company has always been the beneficial owner of the one share held by LinkedIn Technology Unlimited Company as the registered owner. Therefore, the duty to make declarations arose after the company’s incorporation in 2009. These filings should have been made in Form 22B under Section 187C of the Companies Act, 1956, when the beneficial interest actually arose.
The company admitted that the date of creation of the beneficial interest was erroneously declared as 11.01.2024 in Forms MGT-4 and MGT-5. Withdrawal of the e-form is not an option since its filing is legally required. However, the declarations do not comply with the timelines of Section 89(1) and (2), and the date of creation of beneficial interest is incorrect, a fact acknowledged by the company during proceedings.
Section 89(5) stipulates penalties for non-compliance with the declaration requirements of Section 89(1) and (2). By incorrectly disclosing the date of acquiring the beneficial interest, the provisions have not been met. The default period is considered from the decriminalization date of 21.12.2020 to the issuance of the Show Cause Notice on 15.02.2024.
The ROC noted that both the registered owner, LinkedIn Technology Unlimited Company, and the beneficial owner, LinkedIn Ireland Unlimited Company, failed to submit declarations as required under Section 89(1) and (2). Consequently, they are liable for penalties under Section 89(5) of the Act. The default period is from the decriminalisation date of 21.12.2020 to the issuance of the SCN on 15.02.2024.
Additionally, Mr. Satya Nadella and Mr. Ryan Roslansky, as Significant Beneficial Owners (SBOs) of the subject company, are liable for penalties under Section 90(10) for failing to report as required by Section 90(1). Mr. Roslansky was appointed global CEO of LinkedIn Corporation on 1st June 2020 and began reporting to Mr. Nadella. The period of liability is from 01.07.2020 (30 days after Mr. Roslansky’s appointment) to 15.02.2024, the issuance date of the SCN under Section 90.
The ROC decided that the company and its officers are also liable under Section 90(11) for failing to identify the SBO as required by Section 90(4A) and for not sending the mandatory notice as per Rule 2A(2) of the Companies (Significant Beneficial Owners) Rules, 2018, leading to a contravention of Section 90(5) and associated penalties under Section 450. All officers, including non-executive directors, are presumed to have clear knowledge of the company’s holding structure and are liable for this violation from 01.07.2020 to 15.02.2024, the SCN issuance date.
“It is clear that control, or the right to exercise such control or significant influence indirectly, also amounts to the exercise of control and significant influence,” the RoC concluded. The ROC made a detailed analysis of the SBO channel.
The ROC added that the penalty amount must be paid online via www.mca.gov.in (Misc. head) to the “Pay & Accounts Officer, Ministry of Corporate Affairs, New Delhi,” within 90 days of receiving this order. Proof of payment should be sent to this office. Additionally, under Section 454(3)(b) of the Act, the company and its officers must file e-form MGT-6 and BEN-2 within 60 days of this order, following the due process.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
