The Ministry of Corporate Affairs (MCA) has fined Microsoft-owned LinkedIn India, Microsoft CEO Satya Nadella and eight others Rs 2,710,800 for violating Significant Economic Ownership (SBO) rules. in connection with LinkedIn Technology Information. This comes from an order issued by the Registrar of Companies (RoC) for Delhi and Haryana.

For violating the SBO norms, LinkedIn India was fined Rs 700,000. In addition, Nadella and LinkedIn CEO Ryan Roslansky were each fined Rs 200,000. Others who were fined include Keith Ranger Dolliver, Benjamin Owen Orndorff, Michelle Katty Leung, Lisa Emiko Sato, Ashutosh Gupta, Mark Leonard Nadres Legaspi and Henry Chining Fong.

Corporate law experts pointed out that the company can appeal against the RoC order before the Regional Director's Office (MCA) or before a High Court.

Section 90 of the Companies Act requires the identification and disclosure of persons who have beneficial interests in a company.

The RoC's 63-page order said the company and its officers failed to send the required notice under Section 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 subject to penalty under section 90(10) of the Act for failing to report under section 90(1). Ryan Roslansky was appointed global CEO of LinkedIn Corporation on June 1, 2020 and began reporting to Satya Nadella,” the RoC order, which falls under the MCA, said.

“In addition, the company and its executives have not even sent a notice [which was mandatorily required to be sent] under Rule 2A(2) of the Companies (Significant Beneficial Owners) Rules, 2018, resulting in violation of Section 90(5) for which penalty is provided under Section 450. All the officers, including the non-executive directors, are liable for this violation as each such director is presumed to have clear knowledge of the shareholding structure of the company,” it added.

The company argued that Roslansky and Nadella were not substantial beneficial owners of LinkedIn India because they performed their duties as professionals at the discretion of their directors and shareholders. They claimed that if their employment was terminated, they would no longer have authority over LinkedIn India, suggesting a lack of control that is essential to determining SBO status.

However, the RoC rejected this argument, stating that significant beneficial owners are identified by control or significant influence, not necessarily by owning a controlling interest 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 is a subsidiary of Microsoft Group.

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