Professionals under the scanner for unethical conduct
New Delhi, May 1, 2023
The ministry of corporate affairs has taken a serious view of professionals who help companies incorporate by falsely certifying they have visited the premises of the intended registered office.
In an early indication of likely tightening of rules governing these professionals, the ministry has flagged its concerns about wrongful certification of premises of companies to its field officers and to the self-regulator of company secretaries, the Institute of Company Secretaries of India (ICSI), said a person informed about the development.
Company secretaries, chartered accountants, cost accountants and advocates are allowed to make this certification.
Falsely certifying the physical premises is linked to 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 to sensitize professionals about this requirement, said the person speaking on condition of anonymity.
As part of the paperwork of incorporating a company, professionals have to certify 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. Any false statement is liable for punishment.
A second person informed about the government’s concerns said in certain cases, professionals have certified the existence of premises in far-flung states, raising doubts about the veracity of the certification.
ICSI president Manish Gupta told Mint the issue of fraudulent certification is of “grave concern" and that self-regulators have investigated cases for disciplinary action wherever wrongdoing has come to light.
Gupta also said ICSI has undertaken to sensitise its members about their role and responsibilities from time to time. He also referred to certain instances of wrongful actions of companies without knowledge of the professionals, which brings a bad name to the professional comunity.
“The latest issue of finding discrepancies in the address stated in the documents and the actual address of the registered office of companies is indeed a matter of grave concern," Gupta said. While government has provided greater impetus to governance and has laid down rules for certification of address by competent professionals, situations have come to light where the issues still prevail, Gupta said.
Gupta said that a declaration from professionals that all the requirements of law relating to registration have been complied with is not just a tick box exercise, but encompasses huge responsibility on the professionals.
Experts are also of the view that making professionals solely responsible for this regulatory role may not be feasible. “The requirement of verifying the proposed premises of a company to be set up is important from the perspective of regulatory oversight but it may not be viable or feasible to leave that responsibility solely upon professionals like company secretaries, cost accountants and chartered accountants. It is recommended to explore an alternative solution to this key requirement like uploading a video verifying the address, etc," said Noorul Hassan,partner Lakshmikumaran and Sridharan Attorneys.
ICSI’s Gupta also referred to wrongful practices among some companies without the knowledge of the professionals that bring a bad name to professionals. He said shell companies undertaking illegal practices without the knowledge of professionals leads to questions being raised about the credibility of professionals too, just as the ones being asked in the case of certifying office premises.
An email sent to the spokesperson for the ministry of corporate affairs on Friday seeking comments for the story remained unanswered at the time of publishing.
[Mint]
