Professionals under the Scanner of MCA for Unethical Conduct

The Ministry of Corporate Affairs has taken a tough stance against professionals who assist corporations in incorporating by falsely certifying they have visited the premises of the intended registered office.

According to a person familiar with the development, the ministry has flagged its concerns about wrongful certification of company premises to its field officers and the self-regulator of company secretaries, the Institute of Company Secretaries of India (ICSI), as an early indication of likely tightening of rules governing these professionals. This certification can be issued by company secretaries, chartered accountants, cost accountants, and advocates.

Falsifying physical premises is linked to the formation of shell companies, and the government wants field officers and regulators like ICSI, Institute of Chartered Accountants of India (ICAI), and Institute of Cost Accountants of India to be vigilant and educate professionals about this requirement, according to a person who spoke on the condition of anonymity.

Professionals must declare that they have “personally visited the premises of the proposed registered office given in the form” and that the office will function from there after incorporation as part of the documentation for incorporating a company. Any false statement is punishable by law.

A second source familiar with the government’s concerns stated that in certain cases, specialists have confirmed the presence of premises in distant states, casting doubt on the credibility of the certification.

Manish Gupta, president of the ICSI, told Mint that the issue of false certification is a “grave concern” and that self-regulators have investigated instances for disciplinary punishment wherever wrongdoing has been discovered.

Gupta also stated that ICSI has pledged to educate its members on their roles and obligations on a regular basis. He also mentioned instances of firms acting improperly without the knowledge of professionals, which provides a poor name to the professional community.

“The latest issue of finding discrepancies between the address stated in documents and the actual address of the registered office of companies is indeed a matter of grave concern,” Gupta added. While the government has given greater impetus to governance and established rules for address certification by competent professionals, Gupta said that situations have arisen in which the issues persist.

According to Gupta, a certification by professionals that all legal conditions for registration have been met is more than just a checkbox exercise, but entails a great deal of responsibility on the part of the professionals.

Experts also believe that making professionals solely responsible for this regulatory role is unlikely. “The requirement of verifying the proposed premises of a company to be established is important from a regulatory standpoint, but it may not be viable or feasible to leave that responsibility solely on professionals such as company secretaries, cost accountants, and chartered accountants.” It is suggested that an alternative solution to this crucial criterion, such as posting a video authenticating the address, be investigated’, stated Noorul Hassan, partner at Lakshmikumaran and Sridharan Attorneys.

ICSI’s Gupta also mentioned wrongful practises carried out by some companies without the awareness of specialists, which provide a poor name to the profession. He stated that shell corporations engaging in criminal practises without the knowledge of specialists raises doubts about the trustworthiness of professionals, similar to those highlighted in the case of certifying office premises.

An email addressed to the ministry of corporate affairs’ spokeswoman on Friday seeking comments for the story remained unanswered at the time of publication.