Satya Nadella, LinkedIn, 9 others fined ₹27 lakh for breaching SBO norms

The Ministry of Corporate Affairs (MCA) fined Microsoft-owned LinkedIn India, Microsoft chief Satya Nadella and eight other individuals ₹27,10,800 for violating significant beneficial ownership (SBO) regulations related to LinkedIn Technology Information, according to an order from the Registrar of Companies (RoC) for Delhi and Haryana.

For violating SBO norms, LinkedIn India has been fined ₹7 lakh. Additionally, Nadella and LinkedIn CEO Ryan Roslansky have each been fined ₹2 lakh. Other individuals who have been fined include Keith Ranger Dolliver, Benjamin Owen Orndorff, Michelle Katty Leung, Lisa Emiko Sato, Ashutosh Gupta, Mark Leonard Nadres Legaspi, and Henry Chining Fong.

Company law experts noted that the company can appeal the RoC order at the office of the regional director, MCA, or in a high court.

Section 90 of the Companies Act mandates the identification and disclosure of individuals who hold beneficial interest in a company.

The RoC's 63-page order stated the company and its officers failed to send the required notice under Rule 2A(2) of the Companies (Significant Beneficial Owners) Rules.

"... Satya Nadella and Ryan Roslansky are the SBOs in relation to the subject company and are liable to a penalty under section 90(10) of the Act, due to their failure to report as per section 90(1). Ryan Roslansky was appointed as the global CEO of LinkedIn Corporation on 1st June 2020 and started reporting to Satya Nadella," the RoC states, which comes under the MCA, said in the order.

“Also, the company and its officers failed to even send a notice [which was mandatorily required to be sent] as per rule 2A (2) of the Companies (Significant Beneficial Owners) Rules, 2018 leading to a contravention of section 90(5) for which penalty has been provided under section 450. All the officers, including the non-executive directors are liable for this violation due to the presumption of clear knowledge on part of each of such directors about the holding structure of the company," it adds.

The company argued that Roslansky and Nadella are not significant beneficial owners of LinkedIn India, as they perform their duties as professionals at the discretion of their boards and shareholders. They claimed that if their employment were terminated, they would no longer have authority over LinkedIn India, indicating a lack of control, which is essential for determining SBO status.

However, the RoC rejected this argument, stating that significant beneficial owners are identified through control or significant influence, not necessarily by holding a majority stake in the ultimate holding company (Microsoft Corporation). The RoC clarified that control or significant influence can be indirect and does not require participation in day-to-day operations.

LinkedIn India operates as a subsidiary of the Microsoft Group.

The RoC concluded that control, or the right to exercise such control or significant influence indirectly, also constitutes the exercise of control and significant influence.