MCA Fines Zerodha AMC, Firm Plans To Contest

Zerodha Asset Management has been hit with a penalty of Rs 5 lakh by the Ministry of Corporate Affairs (MCA) for delaying the appointment of a Chief Financial Officer (CFO), according to media reports. Founder Nithin Kamath, along with key directors, faces significant fines for this oversight.

Admitting their fault, Zerodha Asset Management filed a suo-moto application on July 9, acknowledging their violation of Section 203 of the Companies Act, 2013. This section mandates that companies with a paid-up share capital exceeding Rs 10 crore must have full-time key managerial personnel, including a CFO.

The firm did not comply with this rule until March 24, 2023, when Chintan Bhatt was appointed as CFO. This delay of 459 days prompted the ministry to impose penalties. Zerodha's key personnel, including Kamath, Director Rajanna Bhuvanesh, CEO Vishal Virendra Jain, and others, received individual fines ranging from Rs 1.50 lakh to Rs 5 lakh.

Zerodha Asset Management, CEO, Vishal Jain responds stating, "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 the Regional Director, Hyderabad on July 16, 2024."

Zerodha Asset Management is now awaiting the outcome of their appeal as they seek to address the unintentional delay and comply with the regulatory requirements.