The CA Institute has issued disciplinary notices to more than 200 chartered accountants for their alleged role in aiding several Chinese firms violate the Companies Act 2013, through their India-incorporated subsidiaries and shell companies in recent years.

“We want to conclude this matter at the earliest, ICAI President Debashis Mitra told BusinessLine, adding that the proceedings were done on a ‘top priority’ basis. It is learnt that the action has been initiated based on a list of 400 professionals (both CAs and Company Secretaries) sent by the government to the ICAI and Company Secretaries Institute.

While in some cases, the Registrar of Companies (RoCs) had complained, in some other, the matter has been considered as information cases. The ICAI had, in June this year, said hundreds of CAs across the country were under the CA Institute’s disciplinary lens.

Welcoming the move

The action could have been prompted by certain non-compliances at the time of incorporation of companies, Sanjay Vasudeva, Senior Partner, SCV & Co LLP, told BusinessLine.

Aseem Chawla, Managing Partner, ASC Legal, lauded the move. “This proactive initiative would assist in the identification of systematic challenges, and the stakeholders would be benefitted. The professional practice, overall ethical quotient and high standards associated is due to the ICAI and its interactions with all the key constituents of governance and possible regulatory enforcement agencies,” he said.

Tightening norms

The Centre, in recent years, has been tightening its foreign direct investment (FDI) regime on investments coming from countries that share land border with India. The apparent effort was to curb Chinese investments in Indian companies. While the Foreign Direct Policy was tweaked in April 2020, making it mandatory to seek the Centre’s nod for investments coming from such neighbouring countries, the Corporate Affairs Ministry (MCA) had, in June this year, stipulated that citizens of those countries should obtains Home Ministry’s clearance if they were to be appointed directors of Indian companies.

The MCA had also recently made rule changes, requiring the furnishing of the Foreign Exchange Management Act (FEMA) compliance declaration at the time of incorporation of companies involving investments from land-border-sharing countries.