THE DELHI HIGH COURT STAYED PENALTY ORDERS OF ₹27.1 lakh IMPOSED BY ROC NEW DELHI AGAINST MICROSOFT & LINKEDIN OVER ALLEGED VIOLATIONS OF SIGNIFICANT BENEFICIAL OWNERSHIP (SBO) DISCLOSURE NORMS.

THE DELHI HIGH COURT  STAYED PENALTY ORDERS OF ₹27.1 lakh IMPOSED BY ROC NEW DELHI AGAINST MICROSOFT & LINKEDIN OVER ALLEGED VIOLATIONS OF SIGNIFICANT BENEFICIAL OWNERSHIP (SBO) DISCLOSURE NORMS.

ALLEGATIONS

Microsoft & LinkedIn Executives allegedly failed to disclose significant beneficial ownership (SBO) in LinkedIn India under Sections 89 & 90 of the Companies Act, 2013.

RoC argued that Nadella and Roslansky were SBOs due to their leadership roles and indirect control over LinkedIn India.

PENALTY

Penalty of  ₹27.1 lakh imposed by the Registrar of Comnpanies (RoC), upheld by MCA’s Regional Director

SBO UNDER INDIAN LAW

LEGAL BASIS:

Sections 89 & 90 of the Companies Act, 2013 + Companies (Significant Beneficial Owners) Rules, 2018.

DEFINITION:

An SBO is any individual who, directly or indirectly, holds ≥10% shares, voting rights, or significant influence/control in a company.

DISCLOSURE REQUIREMENT:

·      SBOs must file Form BEN-1 with the company.

·      The company must file Form BEN-2 with the Registrar of Companies (RoC).

PURPOSE:

To prevent benami holdings (hidden ownership) and improve transparency in corporate structures.

EXAMPLE:

If a person owns 12% of shares in an Indian company through another entity, they must disclose themselves as an SBO.

DEFENSE ARGUMENTS

Disclosures already filed: Petitioners claim they submitted required declarations on January 29, 2024.

MISAPPLICATION OF LAW:

Authorities allegedly misinterpreted Sections 89 & 90.

IMPROPER RELIANCE ON U.S. SEC FILINGS:

Petitioners argued that U.S. securities law disclosures cannot be equated with India’s SBO framework.

LEGAL SIGNIFICANCE

INDIAN VS. U.S. DISCLOSURE FRAMEWORKS:

The case highlights the tension between global corporate reporting standards and India’s SBO rules.

CORPORATE GOVERNANCE PRECEDENT:

The outcome could set a benchmark for how multinational executives are treated under Indian disclosure laws.

INTERIM RELIEF:

The stay prevents enforcement of penalties until the matter is fully adjudicated.

FINAL THOUGHTS

The petitioners further contended that the ROC improperly relied upon disclosures made before the United States Securities & Exchange Commission (SEC) by the Chief Executive Officer of Microsoft Corporation.

According to the petitioners, disclosures made under the US regulatory framework were distinct from the disclosure obligations applicable under the Indian Companies Act in relation to significant beneficial owners.

The Court pointed out that, “The disclosure made before the United States SEC are different and distinct from those applicable to the Significant Beneficial Owners [SBOs] under the Indian statute.”

 

# YOUR COMPLIANCE PARTNER R V SECKAR, FCS, LLB 79047 19295,