The Ministry of Corporate Affairs (MCA) fined Zerodha Asset Management Private Limited and its directors, including founder Nithin Kamath, for the failure to appoint a chief financial officer (CFO) within the given time frame.
As per an MCA court order released on July 31, Zerodha AMC violated Section 203 of the Companies Act, 2013, which mandates companies like Zerodha, which have a paid-up capital of more than ₹10 crore, to have a full-time managerial executive including a chief financial officer.
The company regulator has fined Zerodha AMC ₹5 lakh as a penalty, and founder Nithin Kamath has to pay ₹4.08 lakh for the violation, said the order.
Other key executives who were fined are Rajanna Bhuvanesh (Director), who was fined ₹5 lakh, Chief Executive Officer of Zerodha AMC Vishal Virendra Jain, who was fined ₹3.45 lakh, Company Secretary Shikha Singh, who was fined ₹3.45 lakh, Nitya Easwaran (Director), who was fined ₹1.5 lakh, and Tushar Mahajan (Director), who was fined 1.5 lakh, as per the court order.
“Section 203(1) of the Act mandates that companies of certain sizes must have full-time key managerial personnel, including a CFO and company secretary. Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, specifies that any public company with a paid-up share capital of ₹10 crore or more must comply,” the Companies Act, 2013, read.
The AMC did not adhere to the law until March 2023, when Chintan Bhatt was appointed as the CFO of the company. This delay was the reason for the penalties on the AMC and its directors.
“The Company did not have a Chief Financial Officer till the appointment of Chintan Vasantlal Bhatt on 24.03.2023, thereby violating the relevant provisions of the Act from 20.12.2021 to 23.03.2023 i.e. 459 days,” the MCA stated in its order.
“This order was post incorporation and prior to commencement of business operations. The company has made an application to address the unintentional delay in appointing a CFO within 6 months post incorporation. The ROC order was issued in response to the suo-moto application filed by the company. The Company is contesting the order, and an appeal has already been filed with Regional Director, Hyderabad on July 16, 2024,” said Vishal Jain, Chief Executive Officer of Zerodha Asset Management Private Limited.
The company and the directors have been given 90 days to pay off the penalties to the court. In the case of directors, the amount has to be paid from their own money, said the court order.
