South Korea's richest man in spotlight as RoC hauls up Samsung’s Indian units
- The companies registrar has slapped a penalty of about ₹8 lakh on Samsung Display Noida for not identifying Lee Jae-Yong as a “significant beneficial owner”
- Last month, the RoC slapped penalties of over ₹27 lakh on Microsoft CEO Satya Nadella and LinkedIn CEO Ryan Roslansky on similar charges
The billionaire boss of a Korean chaebol is the latest to attract unwanted attention in India over company ownership rules, less than a month after Microsoft Corp. chief executive Satya Nadella faced a shock penalty over an identical matter. The transgressor this time: Samsung.
Samsung SDI India Pvt. Ltd and Samsung Display Co. Noida Ltd failed to identify Lee Jae-Yong, executive chairman of South Korea's Samsung Electronics Co. Ltd, as a “significant beneficial owner", the registrar of companies in Uttar Pradesh said in separate orders this week.
The registrar slapped a penalty of ₹5 lakh on Noida-based Samsung SDI India, and a fine of ₹1 lakh each on two directors and a company secretary.
Earlier this week, the RoC slapped a penalty of ₹8,14,200 on Samsung Display, its two directors, a company secretary, and a former official for violating Indian laws on significant beneficial ownership.
The fine must be paid in 90 days. The parties have 60 days to appeal against the orders before the corporate affairs ministry’s regional director.
Samsung SDI India is jointly held by Samsung SDI Co. Ltd. of South Korea (99.99%) and Samsung SDI (Hong Kong) Ltd. The ownership of Samsung’s subsidiaries in each other helps the Lee family keep control globally, the RoC said in its order on Friday.
As for Samsung Display, the RoC noted that Samsung Electronics held full ownership rights in the Noida-based subsidiary, and that Lee had been named executive chairman of the South Korean company in October 2022 although he did not have a majority shareholding.
The registrar noted that as per publicly available information, Lee and his family exercised indirect control or had significant influence over Samsung Electronics.
Harvard-educated Lee, the richest South Korean with a net worth of $11.5 billion, is the son of late Lee Kun-hee, who was Samsung's top boss for three decades. Lee has spent time in prison over bribery and financial fraud in Korea, and secured presidential pardon later.
To be clear, the penalties apply to Samsung's India units, and neither to Lee nor the parent company.
Samsung SDI India and Samsung Display did not immediately reply to emails seeking comment.
Who's a beneficial owner?
Under Indian law, every person who holds 10% or higher stake in a company, or exercises control over the firm or has the right to do so, has to declare their beneficial interest in that business to the government.
Control is broadly defined as the right to appoint a majority of the directors of a company or as having the right to control or influence the management on policy decisions directly or indirectly.
Also read |Mint Explainer: Significant beneficial owners and what the govt wants to know
Section 90 of India’s Companies Act 2013 mandates companies to declare significant beneficial ownership. Companies have to maintain a register of such persons and take steps, including legal measures, to identify persons with a significant beneficial interest.
Companies can be fined up to ₹5 lakh for violations, and their officials up to ₹2 lakh.
When RoC pulled up Nadella
In a similar case, RoC for Delhi and Haryana last month slapped penalties of over ₹27 lakh on LinkedIn India, Nadella, LinkedIn CEO Ryan Roslansky and seven other individuals.
RoC in its order then said the company and its officers were liable for action for their failure in identifying its significant beneficial owners. LinkedIn has said it is in compliance with Indian laws.
Microsoft had bought LinkedIn, a business and employment-focused social media platform, for about $26 billion in 2016.
Also read |Mint Explainer: Why has RoC's order against LinkedIn named Microsoft's Nadella
Experts said these orders were penalizing unlisted companies with foreign shareholdings for allegedly not taking required steps in identifying significant beneficial owners.
“From this, it is seen that the government is keen on investigating and identifying significant beneficial owners wherever foreign shareholders are holding a majority stake," said Makarand M. Joshi, founder, MMJC and Associates, a corporate compliance firm.
Emails sent on Thursday to Samsung Display Co. Noida and to two of the officials named in the order seeking comments for the story remained unanswered at the time of publishing.
