Zerodha Asset Management Fined for Delayed CFO Appointment

Zerodha Asset Management fined over CFO appointment; read what the government's penalty notice says - Times of India

Zerodha Asset Management, the mutual fund arm of popular brokerage Zerodha, has reportedly been slapped with penalties by the Ministry of Corporate Affairs (MCA) for failing to appoint a Chief Financial Officer (CFO) on time. According to a report in Money Control, the company and its key directors, including founder Nithin Kamath, have been fined for violating Section 203 of the Companies Act, 2013. The law mandates that companies with a paid-up share capital exceeding Rs 10 crore must have a full-time CFO.Zerodha Asset Management admitted to the lapse in January 2024, acknowledging that it had operated without a CFO from December 2021 to March 2023. "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 Rs 10 crore or more must comply," the order read. "The Company did not have 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 order added. What is the fine imposed on Zerodha This delay of 459 days resulted in penalties totaling Rs 5 lakh for the company and varying amounts for its directors. Nithin Kamath, the company's founder, was fined Rs 4.08 lakh, while other directors faced penalties ranging from Rs 1.5 lakh to Rs 5 lakh. What Zerodha said on the fine Zerodha Asset Management has contested the MCA's order, arguing that the violation occurred before the company began operations. However, the company has been fined and is appealing the decision. "The ROC order was issued in response to the suo-motu application filed by the company. The Company is contesting the order, and an appeal has already been filed with the Regional Director, Hyderabad on July 16, 2024," Jain said in a written statement, responding to Moneycontrol queries. The TOI Tech Desk is a dedicated team of journalists committed to delivering the latest and most relevant news from the world of technology to readers of The Times of India. TOI Tech Desk's news coverage spans a wide spectrum across gadget launches, gadget reviews, trends, in-depth analysis, exclusive reports and breaking stories that impact technology and the digital universe. Be it how-tos or the latest happenings in AI, cybersecurity, personal gadgets, platforms like WhatsApp, Instagram, Facebook and more; TOI Tech Desk brings the news with accuracy and authenticity.

Nithin Kamath, Zerodha AMC, and executives fined by MCA for not appointing CFO on time

Also Read: Around 700 Sebi employees to protest against leadership on Monday: Report Zerodha AMC's penalty is ₹5 lakh and Kamath's penalty is ₹4.08 lakh. Zerodha AMC's top management including Nithya Easwaran, Vishal Virendra Jain, Rajanna Bhuvanesh, Tushar Mahajan and Shikha Singh have been fined ₹1.5 lakh, ₹3.45 lakh, ₹5 lakh, ₹1.5 lakh and ₹3.45 lakh respectively, and they all have to pay the fine within 90 days. However, Zerodha Asset Management Private Limited's CEO Vishal Jain issued a statement saying that the order came after incorporation of the company and before operations commenced. Also Read: Jeff Bezos' wealth drops by $21 billion as Amazon sinks on AI fears "The company has made an application to address the unintentional delay in appointing a CFO within 6 months post incorporation," Jain said. The ROC order was issued in response to the suo-moto application filed by the company, he added. Zerodha had filed a suo-moto application on January 9, 2024, admitting on its own that it violated Section 203 of the Companies Act 2013 by not appointing a CFO within the specified time period. Zerodha AMC has now filed an appeal contesting the order with the Regional Director, Hyderabad on July 16, 2024. the MCA order dated May 5, 2024, published by the MCA on July 31 says, "If any company makes any default in complying with the provisions of this section (Section 203(1)), such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees."