As per Section 203 of the Companies Act, 2013, companies like Zerodha, which are deemed to be public companies with a paid-up share capital exceeding Rs 10 Cr, should have full-time key managerial personnel, including a CFO Zerodha Asset Management, in a suo-moto application filed in January 2024, mentioned that it had not appointed a CFO during that period of time.
Zerodha brothers fined by The Ministry of Corporate Affairs (MCA) due to a delay in appointing a CFO The Ministry of Corporate Affairs (MCA) has reportedly imposed a fine of INR 23.9 Lakh on Zerodha Asset Management over the failure to appoint a Chief Financial Officer (CFO) within the stipulated time.
As per a Moneycontrol report, the MCA slapped the fine on Zerodha Asset Management, cofounder, and director Nithin Kamath, along with other key directors for failing to appoint a financial head within the time mandated by the Companies Act, 2013.
A fine of INR 5 Lakh has been imposed on the company as well as its director Rajanna Bhuvanesh, and Kamath has been charged a fine of INR 4.08 Lakh. More than this, CEO Vishal Virendra Jain and company secretary Shikha Singh were fined INR 3.45 Lakh each, while directors Nithya Easwaran and Tushar Mahajan were fined INR 1.5 Lakh each.
The following company is not appointing a CFO for a period of 459 days between December 20, 2021 and March 23, 2023. Afterward, it eventually appointed Chintan Bhatt as CFO in March last year.
However, the company planning to contest the penalties as Zerodha Asset Management’s CEO Jain told the publication that the order covers the period of time before the company commenced operations but after it was incorporated.
“The RoC (Registrar of Companies) 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.
But it is note that the company received final approval from the market regulator Securities and Exchange Board of India (SEBI) to start the operations of its asset management company (AMC) in August 2023.
Zerodha Fund House is the asset management arm of the company, and as per sources Zerodha Fund House was also said to be in talks with several investors to raise up to $100 Mn in March this year.
Last month, SEBI halted the zero-brokerage facility on discount broking platforms, which can directly impact on the company’s future. Following this, Union Budget 2024-25 also proposed to increase the rates of STT from 0.0625% to 0,1% on options and from 0.0125% to 0.02% for futures, which is also expected to hit Zerodha’s F&O trading. As this was not enough, in late July SEBI also floated a draft paper that aimed to curb the rise of F&O trading in India.
Meanwhile, Zerodha competitor Groww is ahead in the game as the former accounted for over 10 Mn active investors at the end of May 2024, while the latter company has only 7.5 Mn active users.
