Questions Arise over SEBI Chairperson's Firm and Auditor Relationship

Moneylife Digital Team 16 August 2024

Investor Interest

A recent report by Scroll.in has raised questions Agora Advisory Private Limited, a consulting firm founded by Madhabi Buch, before she became the chairperson of the Securities and Exchange Board of India (SEBI), having its registered office in the same address and premises as its statutory auditor, Shah and Savla LLP. Ms Puri Buch holds 99% of equity in Agora Advisory Pvt Ltd. Experts call this a practice adopted by those who are resident abroad but consider it a 'shady' and 'lazy' practice.

More importantly, Ms Puri Buch is resident in India for the past seven years, first in her stint as a whole-time member (WTM) at SEBI and later as chairperson.

This arrangement raises questions about the independence and bias of the auditor but more pertinently raises issues about several new compliances introduced by the ministry of corporate affairs (MCA) as well as tax and revenue authorities with regard to authentication and verification of businesses. Moneylife spoke to auditors who suggested the following potential violations when a company agrees to be housed in the same office as its statutory auditor. The Registrar of Companies requires that the name of the company should be displayed at the entrance of premises. In this case, Scroll reporters not only did not find a name, but the auditors staff was also unaware of the company having the same address as their firm.

1. GST Compliance: Under the Central Goods and Services Tax (CGST) Rules, 2017, every registered person is required to display their GSTIN (goods and services tax identification number) and certificate of registration at their principal place of business and additional places of business. Failure to do so can attract a penalty of up to Rs25,000 under Section 125 of the CGST Act.

2. Companies Act Compliance: MCA has introduced the requirement for companies to file Form INC-22A, also known as the active company tagging and verification (ACTIVE) form, to declare that the company is active and compliant with all provisions of the Companies Act, 2013. This form requires the company to submit a photograph of the registered office address with geo-tagging (latitude and longitude information). Failure to comply can result in a penalty of Rs50,000. Additionally, ROC may strike off the company's name from the private limited company registration process and disqualify the company's directors from holding office in any other company.

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