Zerodha Asset Fined Over Delay in Appointing CFO

The Ministry of Corporate Affairs (MCA) has fined Zerodha Asset Management Private Limited and its key Directors, including founder Nithin Kamath, for not appointing a Chief Financial Officer (CFO) within the required timeframe, thereby violating the law.

On January 9, 2024, Zerodha Asset Management admitted through a suo-moto application that they had breached Section 203 of the Companies Act, 2013, by failing to appoint a CFO.

This law mandates that public companies with paid-up share capital exceeding Rs 10 crore must have full-time key managerial personnel, including a CFO. Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, also specifies this requirement.

The company delayed compliance until March 24, 2023, when Chintan Bhatt was finally appointed as CFO, resulting in a delay of 459 days. This prompted the MCA to impose significant penalties.

Vishal Jain, CEO of Zerodha Asset Management Private Limited, stated that the order pertains to the period following the company’s incorporation but before it began operations. The company had applied to rectify an unintentional delay in appointing a CFO within six months of incorporation.

The company is contesting the order and has filed an appeal with the Regional Director in Hyderabad on July 16, 2024. Despite this, the MCA has imposed a maximum penalty of Rs 5 lakh on the company itself and additional fines on key directors and officers.

Founder and Director Nithin Kamath has been fined Rs 4.08 lakh. Other fines include Rs 5 lakh for Director Rajanna Bhuvanesh, Rs 3.45 lakh each for CEO Vishal Virendra Jain and Company Secretary Shikha Singh, and Rs 1.50 lakh each for Directors Nithya Easwaran and Tushar Mahajan.