ICAI issue Notice to CA Firms on violate Company Law Via Indian subsidiaries Chinese Co.
- About 200 CA firms have received Disciplinary Notices from the ICAI for allegedly engaging in or assisting Chinese firms that were violating the law through Indian subsidiaries and shell entities.
- Considering the extensive alleged/complained by MCA to ICAI/ICSI involvement of professionals in helping the Chinese firms to violate/breach Indian company law, ICAI is conducting disciplinary proceedings on a fast track/priority basis to conclude case as as soon as possible.
- It may be noted that in April 2022, Aiming to penalize 400 chartered accountants and company secretaries for allegedly aiding Chinese corporations in forming shell companies by violating company law, MCA has instructed the relevant ROCs to take action against them in April 2022. As a result, various ROCs have contacted the ICAI/ ICSI to take the necessary actions.
- The preliminary step in the process has been undertaken by the ICAI, the body that regulates the CA profession, by issuing Disciplinary Notices to the appropriate CA Firms. The whole investigation and inquiry into the case have not yet been conducted, so it is premature to predict the conclusion of the company law violation or breach by these CA Firms at this moment.
Company law Tightening norms
- The FDI Regulation for investments coming from countries that share land border with India is Tightening norms / strengthen by the MCA. It seemed that Chinese investments in Indian companies were being restricted. While the Foreign Direct Policy was changed in April 2020 to require the Center's approval for investments from these nearby nations, the Corporate Affairs Ministry (MCA) had previously mandated that residents of those nations obtain the Home Ministry's approval before being appointed directors of Indian companies.
- A recent rule change by the MCA required companies with investments from countries with share land border with India to submit a declaration of compliance with the Foreign Exchange Management Act (FEMA) at the time of incorporation.