We run into many error messages when we share files externally from SharePoint, frequently appearing like the attached image.
We have trouble troubleshooting this, because Microsoft is associating the email being shared to with a Microsoft account. We see this happen often with schools or government organizations that have switched from Office to Google Suites - their email is still associated with the Microsoft account, but the organization does not have licenses for Microsoft and does not have any Microsoft administrators.
As such, we're seeing staff more frequently turning to attachments in emails, or using personal Box accounts to collaborate - not optimal given our retention and security management is focused in SharePoint.
I've tried removing the external address from All Groups and Users, deleting their User Profile - regardless, when they select a new sharing link they are recreated as a Microsoft account in our tenant.
Has anyone run into a way around this? It would be useful for external users like this to have the option of either a verification code or a Microsoft account, instead of enforcing use of potentially inactive Microsoft accounts.