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LinkedIn reviewing order after RoC fines it for allegedly violating beneficial-owner rules
- On Wednesday evening the RoC fined the company's Indian arm Linkedin Technology Information Pvt Ltd, Microsoft CEO Satya Nadella, and Linkedin Corp CEO Ryan Roslansky, among others, for alleged violations of the Companies Act.
New Delhi: Microsoft-owned Linkedin said on Thursday it is in compliance with Indian laws after the Registrar of Companies (RoC) for Delhi and Haryana fined its Indian arm and various officials for allegedly violating significant beneficial ownership rules under the Companies Act, 2013.
In an order published on Wednesday evening, the RoC fined Linkedin Technology Information Pvt Ltd (the Indian arm), Linkedin Technology Unlimited Co (one of its registered shareholders), Linkedin Ireland Unlimited Co (the beneficial owner), Microsoft chairman and chief executive Satya Nadella, and Linkedin Corp chief executive Ryan Roslansky. Microsoft acquired LinkedIn for $26.2 billion in 2016.
A spokesperson for Linkedin told Mint in an emailed statement, “We comply with the laws of the countries we operate in. We are reviewing the order to determine next steps."
Experts said the provision on significant beneficial owners was included in Companies Act in 2018 to determine the real owners of Indian companies who are not registered as shareholders. While the rules provide certain tests for significant beneficial ownership on the basis of the holding of share capital, voting rights and dividend rights, in this case the ROC invoked the test of “control” and “significant influence” to name global leaders of the entity as significant beneficial owners.
This is now set to become an industry-wide issue and many large corporations operating in India may face a similar fate, said a partner at a law firm.
LinkedIn can appeal in 60 days
The RoC, in a 63-page order, fined six executives of the group and another person under two sections of the Companies Act – one that requires identifying the significant beneficial owner and another that deals with issuing notices to such owners.
The RoC order said the parties could appeal against the order before the regional director under the ministry of corporate affairs within 60 days. The order also advised Linkedin Technology Information Pvt Ltd to ensure that all parties paid the penalty. The RoC ordered both the company that is the registered shareholder of Linkedin’s India arm as well as the beneficial owner to pay ₹2,80,400 each.
It also alleged that although Microsoft Corp is named as the ultimate parent of Linkedin’s India entity and Linkedin Corp, USA is not named in the holding structure, Roslansky is a significant beneficial owner of the Indian entity under Companies Act on account of his ability to exercise control over its board of directors.
Since Roslansky reports to Nadella, he is also a significant beneficial owner under Indian law, the RoC said. Nadella and Roslansky have been ordered to pay ₹2 lakh each, while Linkedin Technology Information Pvt Ltd has been ordered to pay ₹7 lakh.
The RoC alleged that the Indian entity had filed a form in January naming LinkedIn Technology Unlimited Co as a registered holder and Linkedin Ireland Unlimited Company is a beneficial owner of one share. It said the beneficial interest was created on 11 January 2024, RoC alleged, which contradicted previous filings that showed the beneficial interest had been created much earlier.
The company replied that the beneficial ownership of the share had always vested with Linkedln Ireland Unlimited Co and had been disclosed to a high court, the RoC, and other statutory authorities as part of a transaction in 2014. “Under the new Companies Act, 2013, the existence of this beneficial ownership has been noted in the annual returns filed since FY2014- 2015,” the company told the RoC, but the authority found the explanation to be “unsatisfactory.”
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Business NewsCompaniesNewsLinkedIn reviewing order after RoC fines it for allegedly violating beneficial-owner rules
First Published:23 May 2024, 12:10 PM IST
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