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TMI Blog2024 (7) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... t influence or control by any individual directly or indirectly. From the details submitted by the reporting company vide its various replies to the Registrar, it is clear that all required information and documentary evidences have not been submitted before this office. Further, it also appears from the material placed in this Order that the reporting company has failed to exercise the necessary due diligence to ascertain the SBO in terms of the provisions of Section 90 of Act r/w SBO Rules. The reporting company has not taken necessary action to identify an individual(s) who is /are SBC) in relation to company and require them to comply with the provisions of Section 90 of the Act, thus the subjected company and its officers who is in default have violated the provisions of Section 90(4A) of the Companies Act, 2013. Adjudication of Penalty - HELD THAT:- In respect of the violation under Section 90 r/w SBO Rules of the Act, the company Samsung Display Noida Pvt. Limited, its officers' are further directed pursuant to Section 454(3) (b) of the Companies Act, 2013 to determine all the individuals who fall under the definition of 'significant beneficial owner' in the lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 reads:- Section 90:- (1) Every individual, who acting alone or together, or through one or more persons or trust, including a trust and persons resident outside India, holds beneficial interests, of not less than twenty-five per cent. or such other percentage as may be prescribed, in shares of a company or the right to exercise, or the actual exercising of significant influence or control as defined in clause (27) of section 2, over the company (herein referred to as significant beneficial owner ), shall make a declaration to the company, specifying the nature of his interest and other particulars, in such manner and within such period of acquisition of the beneficial interest or rights and any change thereof as may be prescribed: Provided that the Central Government may prescribe a class or classes ofpersons who shall not be required to make declaration under this sub-section. (2) Every company shall maintain a register of the interest declared by individuals under subsection (1) and changes therein which shall include the name of individual, his date of birth, address, details of ownership in the company and such other details as may be prescribed. (3) The register maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne year from the date of such order: Provided that if no such application has been filed within a period of one year from the date of the order under sub-section (8), such shares shall be transferred, without any restrictions, to the authority constituted under sub-section (5) of section 125, in such manner as may be prescribed; (9A) The Central Government may make rules for the purposes of this section. (10) If any person fails to make a declaration as required under sub-section (1), he shall be liable to a penalty of fifty thousand rupees and in case of continuing failure, with a further penalty of one thousand rupees for each day after the first during which such failure continues, subject to a maximum of two lakh rupees. (11) If a company, required to maintain register under sub-section (2) and file the information under sub-section (4) or required to take necessary steps under sub-section (4A), fails to do so or denies inspection as provided therein, the company shall be liable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of five hundred rupees for each day, after the first during which such failure continues, subject to a maximum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i), (ii) or (iii), he shall not be considered to be a significant beneficial owner. Explanation Il - For the purpose of this clause, an individual shall be considered to hold a right or entitlement directly in 'the reporting company', if he satisfies any of the following criteria, namely. ' (i) the shares in the reporting company' representing such right or entitlement are held in the name of the individual; (ii) the individual holds or acquires a beneficial interest in the share of the reporting company' under sub-section (2) of section 89 and has made a declaration in this regard to the reporting company Explanation III. - For the purpose of this clause, an individual shall be considered to hold a right or entitlement indirectly in the reporting company', if he satisfies any of the following criteria, in respect of a member of 'the reporting company', namely: -(i)where the member of 'the reporting company' is a body corporate (whether incorporated or registered in India or abroad), other than a limited liability partnership, and the individual, -(a) holds majority stake in that member; or (b) holds majority stake in the ultimate holding co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination of the submission(s) made by the reporting company, it was observed that the reporting company's reason and reply was completely based on the self-evaluation for the shares held for beneficial interests, of not less than 10% of the reporting company by an individual, of the holding company and of the ultimate holding company i.e. SEC, Korea. The reporting company did not take into consideration the nature of indirect holding(s) or exercise of rights (in 'the reporting company') by virtue of rights on distributable dividend and any other distribution, exercise of control or exercise of significant influence. 8. On the observation made at Para 7 above, there existed sufficient reason(s) that 'the reporting company' ought to have also declared its Significant Beneficial Owner in terms of Section 90 r/w the Companies (Significant Beneficial Owners) Rules, 2018 of the Companies Act, 2013, (herein after referred as SBO Rules), hence forward a Show Cause Notice (SCN) was issued to 'the reporting company', its directors and KMP for non-compliance of Section 90 r/w SBO rules made thereunder, vide letter No. 03/07/SBO/UP/2024/Samsung Display/ 248-253 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;) by virtue of shares, voting rights in shares, rights on distributable dividend and any other distribution, exercise of control and exercise of significant influence. The efforts of the company u/s 90 (4A) and (5) of the Act were found to be inattentive. Henceforth, 'the reporting company' was given one more date of hearing on 10.05.2024 along with further clarifications and information and documents so required by the Registrar. The clarifications raised by the Registrar basically required the details of the promoters, directors, KMP, shareholders etc, of certain major companies of Samsung where the promoters of the Samsung Group had cross holdings viz. Samsung SDI Co. Ltd, Korea, Samsung SDI (Hong Kong) Ltd, Samsung C T Corporation, Korea and Samsung Electronics Company Limited, Korea, details of the chairperson of the board meetings of aforementioned companies along with the details of the Ultimate Beneficial Owner (UBO) disclosed to the Banks in India for 'the reporting company' and to furnish the UBO details filed by the holding company in the host country. 11. That as per Reserve Bank of India vide Master Direction DBR.AML.BC.No.81/14.01.001/2015-16 issued M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies. b. In cases of trust/nominee or fiduciary accounts whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary is determined. In such cases, satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting, as also details of the nature of the trust or other arrangements in place shall be obtained. 12. In response to the clarifications raised as mentioned at para- 10 above, 'the reporting company' submitted its incomplete reply through e-mail dated 10.05.2024 and none appeared for the hearing on the day of hearing so fixed. On examination of the response submitted, the company yet again stated that the SDC, Korea and SEC, Korea are listed companies in Korea and are run by professional management. Chairman of these companies are independent directors / professional management and they have never been on the Board of Directors of the reporting company or its immediate holding company i.e. SDC, Korea. Further, it was informed that the reporting co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Report for the year 31.12.2023 that it owns 100% ownership* rights in Samsung Display Noida Private Limited. ( *) Ownership represents the Company's ownership of the voting rights in each entity, including subsidiaries' ownerships. Reference B: Details of Corporate Structure as per information on the Public Domain 14. Further, on the available information in public domain SEC, Korea, is a large family owned company in South Korea. From the shareholding details discussed in para 13, it is aptly clear that the Late Mr. Lee Kun Hee and his family are the largest shareholders of the SEC, Korea, holding, directly and indirectly, more than 25% of its shareholding and voting rights with remaining shareholding being held by public shareholders. It is important to note that in a publicly listed company, where the shareholding is highly distributed among public shareholders, person (s) holding 25% or more of such a company individually or collectively with others will be in a position to exercise control or significant influence over the said company. This can very well be established in the case of the reporting Company by the fact that inspite of not holding majority shareholding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a dual test of objective and subjective for identification of a 'Significant Beneficial Owner'. The section along with the rules provide for determination of the SBO either through a concept of threshold limit in the shares of the company or through exercise of significant influence or a control in the company, thus Section 90 and the SBO Rules made thereunder does not restrict the threshold limit in shares only, to establish the SBO in a company, when there also exists significant influence or control by any individual directly or indirectly . From the information available in the public domain as mentioned and observations made aforesaid, it gives the impression that Mr. Lee Jae-Yong along with his family exercises indirect control or has significant influence over SEC, Korea. Therefore considering Mr. Lee Jae-Yong being appointed as the Executive Chairman of SEC, Korea, 'the reporting company' ought to have declared SBO under the law of the land i.e u/s 90 of the Companies Act, 2013 r/w Rules made thereunder by taking necessary steps to identify an individual who is a significant beneficial owner, in relation to the reporting company and should have required him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o identify an individual(s) who is /are SBC) in relation to company and require them to comply with the provisions of Section 90 of the Act, thus the subjected company and its officers who is in default have violated the provisions of Section 90(4A) of the Companies Act, 2013. 19. Adjudication of Penalty: Taking in consideration the above facts based on the submissions made by the reporting company and the documentary information and evidences filed by them in response to the SCN issued by the Registrar on various dates and also taking into consideration the interpretation of the word control and significant influence and as issued by the Regulatory Authorities, it becomes evident that the company in spite of being given the fair opportunity has failed to prove the that it does not have the significant beneficial ownership or interest in the Indian corporate entity i.e. the reporting company. Further, it is evident from the shareholding pattern of the corporate structure of Samsung Group and factual position as on ground, it appears that in spite of micro shares being held by Mr. Lee Jae-Yong individually, he has been appointed as Executive Chairman of the ultimate holding company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted pursuant to Section 454(3) (b) of the Companies Act, 2013 to determine all the individuals who fall under the definition of 'significant beneficial owner' in the letter and spirit of the Act, in respect of the reporting company and file the relevant e-form BEN-2 with respect to all such individuals within a period of 90 days from the date of this Order. The company and its officers shall pay the said amount of penalty through online www.mca.gov.in (under Misc. Head) or by way of Demand Draft in favour of Pay Accounts Officer, Ministry of Corporate Affairs, New Delhi, payable at Delhi, within 90 days receipt of this order and intimate this office with the proof of penalty so paid. The Demand Draft shall be forwarded to this office address. Appeal against this order may be filed in writing with the Regional Director (Northern Region), Ministry of Corporate Affairs, CGO Complex, Lodi Road, New Delhi, within a period of sixty days from the date of receipt of this order, in Form ADJ setting forth the grounds of appeal and shall be accompanied by a certified copy of this order. [Section 454(5) 454(6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014], A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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