TaxTMI 
TaxTMI 
2024 (7) TMI 448
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....d has its registered office situated at B/1D Sector 81, Phase II, Noida, Gautam Buddha Nagar, Uttar Pradesh, 201305, India. The shareholding details of 'the reporting company' as per list of shareholders attached to e-form MGT-7 for FY 2022-23 is as follows: - Shareholding details Sl. No. Name of shareholder(s) Number of Equity shares (face value of Rs. 10 each) % Holding 1. Samsung Display Co. Ltd, Korea (SDC, Korea) 3,49,99,999 99.99 2. *Mr. Jin Suk Lee 01 Negligible Total 3,50,00,000 100 • *As a nominee of Samsung Display Co. Ltd, As per reply of the company dated 24.04.2024, there is no change in the shareholding of SDC, Korea in SDN since incorporation of SDN. At the time of incorporation, the details of subscribers were as follows: Sl. No. Name of subscriber(s) Number of Equity shares (face value of Rs. 10 each) % Holding 1. Samsung Display Co. Ltd, Korea (SDC, Korea) through its Authorized Representative: Mr. Jaeho Shin ....
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.... having knowledge of the identity of a significant beneficial owner or another person likely to have such knowledge; or (c) to have been a significant beneficial owner of the company at any time during the three years immediately preceding the date on which the notice is issued, and who is not registered as a significant beneficial owner with the company as required under this section. (6) The information required by the notice under sub-section (5) shall be given by the concerned person within a period not exceeding thirty days of the date of the notice. (7) The company shall- (a) where that person fails to give the company the information required by the notice within the time specified therein; or (b) where the information given is not satisfactory, apply to the Tribunal within a period of fifteen days of the expiry of the period specified in the notice, for an order directing that the shares in question be subject to restrictions with regard to transfer of interest, suspension of all rights attached to the shares and such other matters as may be prescribed (8) On any application made under sub-section (7), the Tribu....
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.... the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner. (ii) That Section 2(1) of the Companies (Significant Beneficial Owners) Rules, 2018 of the Act defines 'significant influence' as the power to participate, directly or indirectly, in the financial and operating policy decisions of the reporting company but is not control or joint control of those policies. 5. That Rule 2(1)(h) of the Companies (Significant Beneficial Owners) Rules, 2018 of the Act defines "Significant Beneficial Owner" in relation to a reporting company means an individual referred to in sub-section (1) of section 90, who acting alone or together, or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting company, namely: -(i) holds indirectly, or together with any direct holdings, not less than ten per cent. of the shares; (ii) holds indirectly, or together with any direct holdings, not less than ten per cent. of the vot....
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....uance of notice under Section 206(1) of the Act, 2013 vide letter No. 03/07/SBO/UP/2024/Samsung Display/7022-7025 dated 13.02.2024. The reporting company submitted its reply vide letter dated 22.02.2024 duly signed by its Whole-time Director i.e., Mr. Joogon Seok (through email dated on 22.02.2024) wherein the details of shareholding in 'the reporting company' along with the corporate structure of 'the reporting company' post incorporation in July 2019 was submitted. The reporting company stated that they are 100% owned by SDC, Korea and 84.8% of SDC, Korea shareholding is held by Samsung Electronics Co., Ltd, Korea ("SEC, Korea") and 15.2% is held by Samsung SDI Co. Ltd., Korea ("SDI, Korea"). Further both SEC, Korea and SDI, Korea are listed on the Korean Stock Exchange. The reporting company submitted its corporate structure of the company and the extract of the chart is as follows: Reference A: Details of Corporate Structure as submitted by the Reporting Company Further, the reporting company in its reply stated that a self-evaluation for the identification of the SBO through their holding companies located outside India i.e., SDC Korea and SEC Korea was m....
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....reporting company', where the company denied the non-compliance for the Show Cause Notice so issued by the Registrar u/s 90 r/w the SBO Rules made thereunder under the Act. The response of the company submitted for the SCN issued was similar in nature of the previous response submitted and taking on the grounds referring to the shareholding pattern of 'the reporting company' thereby steady on the defense measure under Rule 2(1)(h) of the Companies (Significant Beneficial Owners) Rules, 2018 of the Act and the Explanation I & Ill to it, in support of its stance that Section 90 of the Act is not applicable and the reporting company is a separate and independent legal entity and is being managed completely by its Board of Directors. Further, no individual has neither majority stakes nor more than 10% stakes neither in the immediate Holding company or in the Ultimate Holding Company of 'the reporting company'. 10. The response submitted by 'the reporting company' dated 24.04.2024, was examined and it was observed that the response was not acceptable as it was not in consonance with the essence of Section 90 of the Act, which reads " ............with respe....
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....hares or capital or profits of the company, 2. "Control" shall include the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements. b, Where the customer is a partnership firm, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15 per cent of capital or profits of the partnership. c. Where the customer is an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15 per cent of the property or capital or profits of the unincorporated association or body of individuals. Explanation: Term 'body of individuals' includes societies. Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official, d. ....
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....or the ownership structure of the reporting company. As per RBI's master direction the disclosure of Beneficial owner is mandatory for opening an account of a Legal Person who is not a natural person. 13. Information accessed from public domain: a. The reporting company submitted response on 10.05.2024, wherein the company has shared the Consolidated Financial Statements of Samsung Electronics Company Ltd., Korea and its list of subsidiaries as of 31st December 2023. It discloses that SEC, Korea is 'the controlling company' and has 232 subsidiaries and has 100% ownership of Samsung Display Noida Private Ltd. The term "Ownership" clarified by SEC, Korea at the foot notes, defines ownership of the voting rights in each of its entities including subsidiaries ownerships. As such it is recognized and documented that SEC, Korea has 100% ownership of the voting rights in Samsung Display Noida Private Ltd. b. In Reference A above, the details of the corporate structure of the reporting Company as submitted by it has been reproduced. As per the said structure, the late Mr. Lee Kun Hee and his family holds around 21.46% shares of the SEC, Korea directly and t....
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....orea, and it is managed by an independent and professional board of directors is relied upon, then there appears to be no reason behind the appointment of Mr. Lee Jae-Yong as the Executive Chairman in October 2022, specifically considering that there is already a Chairman of the Board of Directors of SEC, Korea as per their Articles of Incorporation. Further, the Articles of Incorporation of the SEC, Korea provides for the appointment of a Chairman of the Board of Directors only but due to a lack of accurate information in the public domain, it is also not clear as to how and why Mr. Lee Jae-Yong has been appointed as the Executive Chairman and what powers he exercises over the Board of Directors of SEC, Korea. 15. It appears that the Samsung Group controls more than 80 subsidiaries globally. Approximately 19 of Samsung's subsidiaries are publicly traded on the Korean stock market. Samsung is a large family-owned company in South Korea. As per articles in public domain, Samsung is led by Lee Jae-Yong, a direct descendant of the company's founder. Lee Jae-Yong (also known as Jay Y.Lee) stepped up as Samsung Executive Chairman in October, 2022. The Lee family owns enough s....
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.... 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. 17. The reporting Company, in its reply, self-confessed that it had reasons to believe that there is no individual as SBO u/s 90 of the Act as SDC, Korea (the Holding Company) and SEC, Korea (the Ultimate Holding Company) as they are listed companies in Korea Stock Exchange and are run by independent Board and professional management. The Chairman of these companies are either independent directors or professionals, and they have never been on the Board of Directors of the reporting company or its immediate Holding Company, i.e., SDC, Korea. Hence the reporting company stated that no action u/ s 90(5) of the Act for issuance of BEN-4 to the immediate Holding Company was required. It is noted that under sub-rule 2 of rule 2A of the SBO Rules made thereon, a duty has been cast on the reporting company to give Form BEN 4 seeking the information as required under Section 90(5) of the Act, to all members other than individuals who hold not less than 10% of its shares or....
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....es of incorporation of SEC, Korea available at public domain) speaks of nothing but a proxy-control-vested through legally remote mechanism and hence, in the direction of, to influence the management decision of SEC, Korea. Having arrived at this conclusion I am inclined to conclude that the default u/s 90 r/w SBC) Rules under the Companies Act, 2013, stands established. The default period is counted from the date of decriminalization of default w.e.f. 21.12.2020 till the date of issuance of the Show Cause Notice i.e. 15.04.2024 for violation of Section 90 (4A) and (5) r/w SBC) Rules made thereunder and the default period is for 1212 days. A. Calculation of Penalty imposed for violation of Section 90 r/w SBC) Rules made there under of the Companies Act, 2013:- Violation Section Penalty imposed on & Period Calculation of penalty amount (in Rs.) Penalty imposed as per Section 90(10) /90(11) of CA, 2013 (in Rs.) A B C D Section 90(4A) of CA, 2013 Samsung Display Noida Private Limited (company) Default of 1212 days i.e. from 21.12.2020 to 15.04.2024 1,00,000 + 12....
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....certified copy of this order. [Section 454(5) & 454(6) of the Act, read with Companies (Adjudication of Penalties) Rules, 2014], Attention is also invited to Section 454(8) of the Companies Act, 2013, in the event of noncompliance of this order. In case appeal is made, 0/0 the Registrar of Companies, U.P may be informed alongwith the penalty imposed and the payments made. ============= Document 1 M 17% Samsung Electronics Co. Ltd (SEC) (Korea) SED 1.27% Samsung SD! Co Ltd (30 коÑел Samsung play Co КоÑта Samsung Display Noida Private Limited SON "Both SEC and S are sted entities Real tive-drawn not posible to keep. Total Minority Shareholders Nuarbers in SEC was 6041801 Document 2 Lee Jae -Yong (alongwith family members) 35.4% SAMSUNG C&T CORPORATION 19.3% /19.00% Samsung Life Insurance Co. Ltd 8.68% Lee Jae-Yong (family members) 21.46% 35.4% Samsung C&T corporation Other minority shareholders 5.01% 64.85% Samsung Electronics Co. Limited. (SEC Korea) Holds 84.8 % shares Holds 19.13% Samsung SDI Co. Limited Korea Samsung Display....