Zerodha Asset Management without a CFO

• 459 days without a CFO!
• It is the reason why Zerodha Asset Management has been hit with a substantial penalty by the Ministry of Corporate Affairs of India.
• The company has been fined approximately ₹23.9 lakhs.

What happened?

Zerodha Asset Management, a prominent player in India’s financial landscape, has recently faced scrutiny from the Ministry of Corporate Affairs (MCA) for non-compliance with Section 203 of the Companies Act.

The issue centers on the company’s delay in appointing a Chief Financial Officer (CFO), resulting in hefty penalties for both the organization and its leadership.

Zerodha’s violation of the Companies Act, 2013

The Companies Act, 2013, Section 203, requires companies of certain sizes, particularly those with paid-up share capital over ₹10 crore, to appoint full-time key managerial personnel, including a CFO and a company secretary.

Zerodha Asset Management, operating under Zerodha Fund House, functioned without a CFO for 459 days, spanning from December 20, 2021, to March 23, 2023.

This compliance gap prompted the MCA to intervene.

The company later filled the position by hiring Chintan Vasantlal Bhatt on 24th March, 2023.

Suo-Moto application

On January 9, 2024, Zerodha Asset Management admitted its non-compliance by submitting a suo-moto application.

Penalty levied 

This self-disclosure led the Karnataka Registrar of Companies (RoC) to levy penalties on the company.

The MCA has levied a maximum penalty of ₹5 lakh on the company.

Additionally, Founder and Director Nithin Kamath was fined ₹4.08 lakh, while Director Rajanna Bhuvanesh received the highest penalty of ₹5 lakh.

CEO Vishal Jain and Company Secretary Shikha Singh were each fined ₹3.45 lakh, and Directors Nithya Easwaran and Tushar Mahajan were fined ₹1.50 lakh each, according to Money Control.

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Zerodha’s response

Zerodha Asset Management has challenged the MCA’s ruling, contending that the CFO appointment delay occurred before the company began operations.

Despite this defense, the firm has been fined and filed an appeal with the Hyderabad Regional Director on July 16, 2024, according to Moneycontrol.

About Zerodha Asset Management

Zerodha Asset Management Private Limited (ZAMPL) or Zerodha Fund House is the asset management arm of the popular Indian brokerage firm, Zerodha.

The company received final approval from the Securities and Exchange Board of India (SEBI) to commence operations in August 2023.

The firm operates as a joint venture between Zerodha and the investment technology platform smallcase.

In March, Zerodha Mutual Fund announced that it had crossed Rs 1,000 crore in assets under management (AUM).

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Leadership

Chief Executive Officer (CEO) & Sales Head – Vishal Jain

Chief Operating Officer (COO) & Investor Relation Officer (IRO) – Anand Jasrapuria

Chief Information Security Officer (CISO) – Chirag Rastogi

Chief Risk Officer (CRO) – Akshay Degamwar

Chief Technology officer (CTO) – Ratan Kumar

Wrapping up

Zerodha Asset Management’s case underscores the vital role of corporate governance in companies’ long-term success, especially in highly regulated sectors like asset management.

While Zerodha has taken steps to rectify the issue, this corporate governance lapse may affect the company’s reputation and expansion in these developing markets.