Control Beyond Borders: Foreign Corporate Disclosures as Evidence of “Control” in India’s SBO Regime

[Raghuvansh and Kartik are students at Rajiv Gandhi National University of Law.]

On 15 May 2026, the Delhi High Court stayed penalty orders against LinkedIn Technology Information Private Limited (LinkedIn India), its directors, Microsoft’s Chairman and CEO Satya Nadella, and LinkedIn Corporation’s CEO Ryan Roslansky. The Delhi High Court has listed the matter for March 2027.

The Registrar of Companies (RoC) had held in May 2024 that both the CEOs were Significant Beneficial Owners (SBOs) of LinkedIn India under Section 90 of the Companies Act 2013 (Act), although neither held shares in it, sat on its board or had any documented right over its affairs.

To reach the two executives, the RoC relied on Microsoft’s bylaws, LinkedIn Corporation’s bylaws filed with the US Securities and Exchange Commission (SEC), US state filings and a LinkedIn webpage stating that Ryan Roslansky reports to Satya Nadella (Reporting Hierarchy). None of it was prepared for an Indian regulator, and none of it concerns LinkedIn India.

This piece argues that the RoC could consult such material but not use it for the work it did. The article (a) sets out the order’s reasoning, (b) identifies where it fails, (c) answers the RoC’s best arguments, and (d) draws on comparative and domestic models, before the conclusion proposes three reforms.

Three Routes to the Top of the Chain

The proceedings began with a narrow Section 89 & 90 irregularity where LinkedIn India had misstated the date on which a nominee shareholding within the group arose. The show cause notice also asked why it had never declared an SBO. The company replied that Microsoft is a listed company and had widely held shares, with no individual holding 10% or more. The RoC held that this answered only the shareholding limbs of Rule 2(1)(h) of the Companies (Significant Beneficial Owners) Rules, 2018 (SBO Rules), and turned to clause (iv) of Rule 2(1)(h), which covers an individual as an SBO, provided he has the right to exercise, or actually exercises, significant influence or control.

RoC then took three routes. First, LinkedIn India’s financial statements call LinkedIn Corporation its “holding company”, although it is absent from the shareholding chain. The RoC reasoned that LinkedIn Corporation must therefore control LinkedIn India’s board under Section 2(87)(i) of the Act. RoC further reasoned that this control could not sit with LinkedIn Corporation’s two directors, who also sit on LinkedIn India’s board and “cannot be said to control themselves”; and that it sat instead with Roslansky, and through the corporate hierarchy between the groups, with Nadella. Second, a “reporting channel” test held that because most of LinkedIn India’s directors are group employees whose Reporting Hierarchy end with the two CEOs, the CEOs have a right to control them. Third, a “financial control” test relied on resolutions naming Microsoft’s treasury officers as bank signatories.On the basis of this, RoC put penalties on both the CEOs which totalled about INR 27.1 lakh.

From Corporate Control to Personal Control

The domestic record shows that LinkedIn India was run as a part of the Microsoft group. That was never disputed. LinkedIn India itself told the RoC that Microsoft controls it through its subsidiaries’ shareholding. Section 90 asks a different question: whether a natural person holds significant influence or control in the reporting company. The step from corporate to personal control comes from foreign materials, and there the reasoning of RoC fails in three ways.

Authority within the parent is not control over the subsidiary. 

According to Microsoft, its bylaws give its CEO “general charge and supervision” of Microsoft’s business. That describes Nadella’s authority within Microsoft, not over LinkedIn India. Treating authority as transferable would make the CEO of every listed multinational an SBO of each of its Indian subsidiaries, turning clause (iv) of Rule 2(1)(h) into a mechanism for tracing corporate hierarchies. Admittedly, Section 2(27) of the Act defines “control” very widely, covering rights exercisable “directly or indirectly” and “in any other manner”. On this basis, a case can be made that clause (iv) extends to control exercised at any level of a corporate group. However, these words only widen how control may be held; that control must still be over the reporting company. This interpretation can be substantiated in the following manner. Rule 2(1)(i) of the SBO Rules define significant influence as the power to participate, “directly or indirectly”, in the financial and operating policy decisions “of the reporting company”.

The objection, then, is not that SEC filings were written for another regulator; it is that they prove authority over a different company. The webpage has the same defect: control need not be written down, as the RoC rightly held, but a Reporting Hierarchy within a group is an incident of employment, not a relationship with LinkedIn India.

A Reporting Hierarchy does not confer a right. 

The RoC held that actual exercise of control “is not required to be proved”. However, the RoC needed a right to exercise such control to prove an SBO, and found one in the directors’ Reporting Hierarchy. But an employer cannot direct how its employee votes on another company’s board. Section 166(2) of the Act requires every director, nominee or not, to act in good faith in the best interests of the company on whose board they sit. An indirect right does not prove actual control or influence. The RoC should have found actual exercise of control with evidence, which it expressly declined to do.

The first route rests on a flawed premise. 

Under Section 2(87) of the Act, the power to appoint or remove a subsidiary’s directors belongs to the holding company, exercised collectively; overlapping board membership does not shift it to the parent’s CEO. The route also relied on LinkedIn Corporation’s 2016 bylaws without asking whether those bylaws even governed the conduct or had any role during the period of default.

Answering the Registrar

Three arguments support the order.

First, the SBO regime targets control hidden behind complex corporate hierarchical chains. But the present chain ends at one of the most heavily disclosed companies in the world, and treating that transparency as evidence against the group defeats the SBO regime’s purpose.

Second, LinkedIn India declined to produce LinkedIn Corporation’s bylaws and Roslansky’s employment agreement, although two of its own directors sit on LinkedIn Corporation’s board and Section 90(4A) places the duty to identify SBOs on the company. This definitely puts LinkedIn India in a bad light and puts questions on the company. But any adverse inference by the RoC can only fill gaps about what those documents say, and an agreement with LinkedIn Corporation cannot confer a right over LinkedIn India.

Third, Nadella chairs Microsoft’s board, and the UK guidance discussed below lets an excepted role be displaced where it is exercised beyond its ordinary scope. Both points are fair. But chairing a board confers authority over its procedure, not a power to bind it. Thus, a chairmanship, a Reporting Hierarchy and a 2022 office visit by Nadella to LinkedIn India’s office are how a group CEO ordinarily operates.

Futhermore, a procedural gap remains. Several materials that carry weight in the order, including SEC filings from Microsoft’s other acquisitions, appear only in its analysis, and not in the queries put to the company. Non-cooperation may justify looking further, but it does not excuse denying a chance to these penalised individuals to contest the inference drawn by the RoC.

What Other Regimes Do

The UK’s People with Significant Control regime would rarely reach the question. Under section 790C of the Companies Act 2006 and the PSC Regulations 2016, a company traces its ownership chain only as far as the first “relevant legal entity” subject to its own disclosure requirements, a category that includes companies listed on specified US markets such as NASDAQ. A UK subsidiary in LinkedIn India’s position would register Microsoft and stop. Where the question of control does arise, the statutory guidance also lists some excepted roles, for which it is assumed that there is no significant control or influence. Such excepted roles include an employee acting in the course of their employment. The PSC’s test for control rests on the person’s relationship with the company in question, and not their rank in the corporate hierarchy.

The US Corporate Transparency Act, which the RoC also cited, treated senior officers as having substantial control, but always exempted entities wholly owned or controlled by SEC-reporting issuers, and since March 2025 has exempted US-formed companies altogether.

India’s own law uses the same logic. Rule 9(3)(f) of the Prevention of Money-laundering (Maintenance of Records) Rules 2005 (PMLA Rules) does not entail a beneficial-owner identification for entities listed in India or on notified foreign exchanges, and for their subsidiaries. Rule 9(3)(d) considers the “senior managing official” as the SBO, where no natural person can otherwise be identified. The SBO Rules have neither. Without a registrable-parent route, the regulator is pressed to find an individual; and without a senior-official fallback, the RoC in effect supplied one and called it control.

Conclusion: Three Fixes

First, the SBO Rules should let a reporting subsidiary company exclude its parent company, provided the parent company is listed on a competent exchange with equivalent disclosure obligations. This is similar to the UK regime and Rule 9(3)(f) of the PMLA Rules.

Second, the Ministry of Corporate Affairs should issue guidance on clause (iv) of Rule 2(1)(h) of SBO Rules, with indicators of control and excepted roles for group employees and officers acting in the ordinary course, subject to an override for roles exercised beyond that scope. It should not confine clause (iv) to documented rights, which the text does not allow. It should rather require that any right or exercise should relate to the reporting company itself.

Third, a finding under clause (iv) of Rule 2(1)(h) of SBO Rules should identify the specific right or act of control on which it rests, and every document relied on should be put to each identified SBO. Foreign filings could then corroborate a relationship rather than establish it alone.

Whatever the High Court decides in March 2027, the case exposes a gap in design rather than a rogue order. Until the SBO Rules provide for groups whose only owner is the public market, regulators will keep looking for a natural person at the top of the chain, and foreign disclosures will keep supplying one.