Violation of Companies Act: SEBI questions LinkedIn over fund raising

Capital market watchdog, SEBI (Security and Exchange Board of India) has questioned LinkedIn over publicly fundraising issue via its Professional networking platform for startups.

Under existing private placement norms of the Companies Act, no entity can raise investments from more than 200 investors without making a public issue of the securities offered in lieu of such investments and listing such securities on a recognized stock exchange.

In a reply, LinkedIn has denied the reports, stated that it is not involved in any activities related to securities markets.

"LinkedIn’s vision is to create economic opportunity for the entire global workforce. We can confirm that LinkedIn is not engaged in any activities associated with the securities market," said Deepa Sapatnekar, head of communications for LinkedIn India. The report was first published in Mint.

This is the first such allegation of violation of Company Act on LinkedIn, which has several angel investors and other similar funding groups which claim to be able and willing to help any registered LinkedIn member with money to fund entrepreneurial activities.

These include groups with names such as "Startups and Entrepreneurs Get Funded"(62,396 members) and "Global Investment Network" (44,005 members).

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In March this year, SEBI set up a regulatory framework for crowdfunding, which a minimum net worth criteria for investors to be eligible to invest in start-ups through such platforms, capping individual investments, and standardising disclosure requirements for start-ups raising the money.

The financial regulator is all set to release its norms for crowdfunding channels across country, aiming that large firms and institutional investors to fund money via this channel, ask such investors to take prior nod from it before getting access to such platforms.

Currently, LinkedIn has about 42 million users in India, nearly 10 per cent of its total users worldwide, making it the second largest after US. Besides, targeting working class, the professional networking site has been keeping sharp focus on students through India centric products like LinkedIn Placements.

SEBI: Website