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May 23, 2024

LinkedIn India Fined for Companies Law Violations: Nadella Among Penalized

The Ministry of Corporate Affairs (MCA) has imposed substantial fines on LinkedIn India, Microsoft CEO Satya Nadella, and eight other individuals for breaching significant beneficial owner (SBO) norms under the Companies Act, 2013. This action underscores the MCA’s commitment to enforcing corporate transparency and accountability.

LinkedIn, the professional networking platform acquired by Microsoft in December 2016, is at the center of this legal issue. The Registrar of Companies (RoC) for the NCT of Delhi & Haryana issued a comprehensive 63-page order detailing the violations and corresponding penalties.

Violation of Significant Beneficial Owner Norms

According to the Companies Act, 2013, specifically Section 90, entities must disclose the details of their SBOs. The RoC identified Satya Nadella and Ryan Roslansky, LinkedIn’s global CEO since June 2020, as significant beneficial owners who failed to comply with these disclosure requirements. The order highlighted their failure to report their SBO status in accordance with Section 90(1), rendering them liable for penalties under Section 90(10) of the Act.

The RoC’s investigation revealed that LinkedIn India and its officers did not take the necessary steps to identify and report the SBOs related to the company. Additionally, they neglected to issue mandatory notices as required by Rule 2A (2) of the Companies (Significant Beneficial Owners) Rules, 2018. This omission constitutes a violation of Section 90(5) of the Companies Act, subject to penalties under Section 450.

Imposed Penalties

The total fines imposed amount to Rs 27,10,800, distributed among LinkedIn Technology Information Pvt Ltd (LinkedIn India), Nadella, Roslansky, and seven other individuals. Specifically, LinkedIn India faces a penalty of Rs 7 lakh, while Nadella and Roslansky each face fines of Rs 2 lakh. The other penalized individuals include Keith Ranger Dolliver, Benjamin Owen Orndorff, Michelle Katty Leung, Lisa Emiko Sato, Ashutosh Gupta, Mark Leonard Nadres Legaspi, and Henry Chining Fong.

Legal and Corporate Implications

The order emphasizes the responsibility of companies and their officers to adhere to SBO disclosure norms. It also highlights that non-executive directors are presumed to have clear knowledge of their company’s holding structure, making them liable for compliance failures.

LinkedIn India, a subsidiary of the Microsoft Group, now faces the challenge of addressing these legal repercussions. The company and the involved individuals have the option to appeal the order with the Regional Director (NR) within 60 days of receiving the decision.

Conclusion

This incident serves as a crucial reminder for multinational corporations and their subsidiaries to rigorously follow local corporate governance regulations. The MCA’s stringent enforcement of the Companies Act, 2013, particularly the SBO norms, is a clear message to corporate entities about the importance of transparency and compliance in their operations.

For LinkedIn India and the Microsoft Group, this legal development necessitates a reassessment of their compliance protocols to prevent future violations and uphold their corporate responsibilities.

Jhumpa Lahiri

Jhumpa Lahiri

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