caalley logo

The alley for Indian Chartered Accountants

ICAI sets ball rolling on ‘aggregation of firms’, takes two key decisions

July 7, 2024 

ICAI Central Council relaxes demerger window norm, allows LLP to be partner in other LLPs

The CA Institute has made two key decisions to create a supportive framework for the aggregation and expansion of CA firms, President Ranjeet Kumar Agarwal announced.

These decisions were taken at the Central Council meeting that ended on July 2.

One of them is related to relaxation of the existing five-year demerger norm to a ten-year period. Earlier, firms going in for a merger can regain their legal names if they do a demerger within five years. After five years, they will lose the chance of getting back their old names. This norm had come in the way of mergers among CA firms as they felt the window was too short and they couldn’t come back to earlier structure if merger did not work out as planned, Agarwal explained.

Now there will be trust that till ten years, the earlier legal names will be preserved and if mergers don’t work, the concerned firms can go in for demerger anytime upto those ten years, he added.

“If you are not happy with the merger, then you can de-merge till ten years and get your old names back. This decision will increase the confidence to go in for mergers,” he said.

Limited Liability Partnership

The second decision is on allowing Limited Liability Partnership (LLP) to become a partner in another LLP. “By retaining the two firm identity intact, the two firms can still come together and work with combined strength to bid for projects and deliver. There will be combined resource and combined expertise,” Agarwal said.

ICAI President also said that more steps are on the anvil to promote ‘aggregation of firms’. The next council meeting could see approval of international networking guidelines, he added.

The framing of international networking guidelines is part of terms of reference of ICAI committee on ‘aggregation of CA firms’. The committee is yet to submit its report to central council.

The ICAI moves on ‘aggregation of firms’ are significant as government wants Indian audit firms to grow big and form international networks at global stage.

Prime Minister Narendra Modi had in his first term in July 2017 — during his address at the chartered accountants day event — called for creating four big Indian accounting firms that are counted among the world’s Big-8.

Currently, there are about 96,000 CA firms in India with about 1.6 lakh practising chartered accountants. Of these, about 75,000 firms are proprietorships.

[The Hindu Business Line]

Read more on:
Don't miss an update!
Subscribe to our newsletter