Zerodha AMC Fined by MCA for Delay in Appointing CFO

The Ministry of Corporate Affairs (MCA) has fined Zerodha Asset Management Company (AMC) and its management, including founder Nithin Kamath, for delaying the appointment of a Chief Financial Officer (CFO), which is a violation of rules.

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. They all have to pay the fine within 90 days.

Statement from Zerodha AMC CEO:

However, Zerodha Asset Management Private Limited’s CEO, Vishal Jain, issued a statement saying that the order came after the company’s incorporation and before operations commenced.

“The company has made an application to address the unintentional delay in appointing a CFO within 6 months post incorporation,” Jain said.

Background of the ROC Order:

He added that the ROC order was issued in response to Zerodha’s suo-moto application filed on January 9, 2024. Zerodha admitted on its own that it violated Section 203 of the Companies Act 2013 by not appointing a CFO within the specified time period.

Appeal Against the MCA Order:

Zerodha AMC 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, states, “If any company makes any default in complying with the provisions of this section (Section 203(1)), such company shall be liable to a fine of five lakh rupees and every director and key managerial personnel of the firm who is in default shall be exposed to a penalty of fifty thousand rupees and where the bankruptcy is a continuing one, with a further fine of one thousand rupees for per day after the first during which such bankruptcy continues but not exceeding five lakh rupees.”