CA Amresh Vashisht
A Chartered accountant in practice can also practice in corporate form. The Council permits a Chartered Accountant in practice to practice in Corporate Form also subject to compliance of Guidelines for Practice in Corporate Form. He can operate both the entities simultaneously. This is to empower the members to face the emerging challenges in the service sector as well as to equip themselves for the opportunities in the non-audit service area.
The Council at its 261st meeting held from 1st to 3rd August 2006 decided to allow members in practice to hold the office of Managing Director, Whole-time Director or Manager of a body corporate within the meaning of the Companies Act, 1956 provided that the body corporate ( ( Management Consultancy Company )is engaged exclusively in rendering “Management Consultancy and Other Services” permitted by the Council in pursuant to Section 2(2)(iv) of the Chartered Accountants Act, 1949 and complies with the conditions(s) as specified by the Council from time to time in this regard. The guidelines in this regard have been issued w. e. f. 01.10.2006.
Any member, who wishes to become Managing Director/Whole-time Director /Manager of an existing Company, shall comply with the Guidelines for Practice in Corporate Form. Further member can retain full time Certificate of Practice besides being the Managing Director/Whole-time Director/Manager of Management Consultancy Company. He will be entitled to train articled/audit assistant(s). There will be no restrictions on the quantum of the equity holding of the member, either individually and/or along with his relatives, in such a company.
MANAGEMENT CONSULTANCY COMPANY (MCC)
A normal company incorporated for the purpose or any existing company can be use to have a practice in corporate form. ICAI declared such company as Management Consultancy Company.Any Company complies with the Guidelines for Practice in Corporate Form issued by the Institute shall be a Management Consultancy Company. A Chartered Accountant in practice can also run a Management Consultancy Company. This Management Consultancy Company shall have a distinct name which shall be approved by the Institute.
NON AUDIT SERVICES CAN BE PROVIDED THROUGH MCC
Management Consultancy & Other Services permitted by the Council in pursuance to Section 2(2)(iv) of the Chartered Accountants Act, 1949. The definition of the expression “Management Consultancy and other Services” as appearing at pages 8-10 of Code of Ethics, 2005 edition, is as under:
The expression “Management Consultancy and other Services” shall not include the function of statutory or periodical audit, tax (both direct taxes and indirect taxes) representation or advice concerning tax matters or acting as liquidator, trustee, executor, administrator, arbitrator or receiver, but shall include the following:
(i) Financial management planning and financial policy determination.
(ii) Capital structure planning and advice regarding raising finance.
(iii) Working capital management.
(iv) Preparing project reports and feasibility studies.
(v) Preparing cash budget, cash flow statements, profitability statements, statements of sources and application of funds etc.
(vi) Budgeting including capital budgets and revenue budgets.
(vii) Inventory management, material handling and storage.
(viii) Market research and demand studies.
(ix) Price-fixation and other management decision making.
(x) Management accounting systems, cost control and value analysis.
(xi) Control methods and management information and reporting.
(xii) Personnel recruitment and selection.
(xiii) Setting up executive incentive plans, wage incentive plans etc.
(xiv) Management and operational audits.
(xv) Valuation of shares and business and advice regarding amalgamation, merger and acquisition.
(xvi) Business Policy, corporate planning, organisation development, growth and diversification.
(xvii) Organisation structure and behavior, development of human resources including design and conduct of training programmes, work study, job-description, job evaluation and evaluation of workloads.
(xviii) Systems analysis and design, and computer related services including selection of hardware and development of software in all areas of services which can otherwise be rendered by a Chartered Accountant in practice and also to carry out any other professional services relating to EDP.
(xix) Acting as advisor or consultant to an issue, including such matters as: –
(a) Drafting of prospectus and memorandum containing salient features of prospectus. Drafting and filing of listing agreement and completing formalities with Stock Exchanges, Registrar of Companies and SEBI.
(b) Preparation of publicity budget, advice regarding arrangements for selection of (i) ad-media, (ii) centre for holding conferences of brokers, investors, etc., (iii) bankers to issue, (iv) collection centre, (v) brokers to issue, (vi) underwriters and the underwriting arrangement, distribution of publicity and issue material including application form, prospectus and brochure and deciding on the quantum of issue material (In doing so, the relevant provisions of the Code of Ethics must be kept in mind).
(c) Advice regarding selection of various agencies connected with issue, namely Registrars to Issue, printers and advertising agencies.
(d) Advice on the post issue activities, e.g., follow up steps which include listing of instruments and despatch of certificates and refunds, with the various agencies connected with the work.
Explanation: For removal of doubts, it is hereby clarified that the activities of broking, underwriting and portfolio management are not permitted.
(xx) Investment counseling in respect of securities [as defined in the Securities Contracts (Regulation) Act, 1956 and other financial instruments.] (In doing so, the relevant provisions of the Code of Ethics must be kept in mind).
(xxi) Acting as registrar to an issue and for transfer of shares/other securities. (In doing so, the relevant provisions of the Code of Ethics must be kept in mind).
(xxii) Quality Audit.
(xxiii) Environment Audit.
(xxiv) Energy Audit.
(xxv) Acting as Recovery Consultant in the Banking Sector.
(xxvi) Insurance Financial Advisory Services under the Insurance Regulatory & Development Authority Act, 1999, including Insurance Brokerage.
(xxvii) Further The Council at its 263rd meeting held from 12th to 14th October 2006 clarified that the expression “Management Consultancy & Other Services” already includes such services as rendered by a Certified Filing Centre under MCA 21 e-governance programme of the Ministry of Company Affairs, Government of India
REQUISITES FOR NAME OF THE MCC
The Management Consultancy Company shall have a distinct name which shall be approved by the Institute. Standards prescribed in Regulations 190 of the Chartered Accountants Regulations, 1988 shall be applicable to the name of the Management Consultancy Company. However, even if a name is provided and subsequently it is found that the same is undesirable then said name can be withdrawn at any time by the Institute. The provisions in respect of name of companies as prescribed in the Companies Act, 1956 shall be applicable in letter and spirit. The name of Management Consultancy Company may indicate the area of ‘Management Consultancy & Other Services’ permitted by the Council from time to time. The Management Consultancy Company shall neither be permitted to advertise nor to use logo. The prescribed format of application for approval of Name for Management Consultancy Company is at Form `G’ .
OBJECTS CLAUSE OF MCC
The Object Clause should restrict itself only to the Management Consultancy & Other Services permitted by the Council in pursuance to Section 2(2)(iv) of the Chartered Accountants Act, 1949.The Management Consultancy Company shall engage itself only in Management Consultancy & Other Services. The Management Consultancy Company shall give an undertaking that it shall render only Management Consultancy & Other Services prescribed by the Council pursuant to powers under section 2 (2)(iv) of the Chartered Accountants Act, 1949.
MCC TO COMPLY AFTER REGISTRATION
After approval of the name under Guideline 3 and incorporation under the Companies Act, 1956, the Management Consultancy Company is required to be registered with the Institute in a prescribed Form ‘H’. Once the Management Consultancy Company is Registered with the Institute as per the Guidelines, it will be necessary for such a Company to comply with the following requirements:
a) If the individual practitioner/sole-proprietorship firm/partnership firm is the statutory auditor of an entity then the Management Consultancy Company should not accept the internal audit or book-keeping or such other professional assignments which are prohibited for the statutory auditor firm.
b) The Notification No. 1-CA(7)/60/2002 dated 8th March, 2002 in respect of ceiling on Non-audit fees is applicable in relation to a Management Consultancy Company.
c) The Management Consultancy Company shall comply with clauses (6) & (7) of Part-I of the First Schedule to the Chartered Accountants Act, 1949 and such other directives as may be issued by the Institute from time to time. The Management Consultancy Company shall give an undertaking to comply with clauses (6) & (7) of Part-I of the First Schedule to the Chartered Accountants Act, 1949 and such other directives as may be issued by the Institute from time to time .
TRANSITORY PROVISIONS FOR EXISTING COMPANY
Any member, who wishes to become Managing Director/Whole-time Director /Manager of an existing Company, which is rendering Management Consultancy & Other Services, and wishes to take other benefit contained in the Guidelines, shall comply with the Guidelines for Practice in Corporate Form. The Company is required to take approval of name and then apply for registration with the Institute. If the Institute has reservation over the name of an existing Company that wishes to come under the provisions of this Guidelines, the Company shall be required to apply for change in name. The Company is also required to change its object clause, if the same contains objects other than those provided in the Guidelines.
STEP BY STEP PROCEDURES FOR FORMATION OF MCC
Select specialized services for consultancy services as mentioned in Section 2(2)(iv) of the Chartered Accountants Act, 1949
Get the approval of name from respective ROC.
It is require to submit form “G” with ICAI to seek name approval for the MCS Company after approved by ROC. First Part of Name usually indicates of the promoters name and second part indicates of specific area for proposed consultancy services. Any abstract name or name of God/Goddess or other than human being is not permissible. Usually suffix as allowed by ROC is permitted with name of MCS Company
Preparation of Memorandum of Association and Article of Association of the company and executing legal documents required for the same. Define the object clause of the Management Consultancy Company as the Management Consultancy Company shall engage itself only in Management Consultancy Services identified by ICAI under relevant guidelines and the other services prescribed by the Council of the Institute. Get it registered with respective ROC.
File an application with Regional Office of ICAI for registration of Management Consultancy Company in the prescribed format i.e. forms “H”.
The necessary changes in Companies Act 2013 have yet to replace in the guidelines issued for the purpose. The option of to have an OPC has also not taken care of by the regulator so far. It is also not possible to incorporate a company through INS 29 because of requisition of name approval from ICAI.
FORMS PRESCRIBED FOR THE NETWORK
APPLICATION FOR APPROVAL OF NAME FOR PROPOSED MANAGEMENT CONSULTANCY COMPANY
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
1. Proposed name of the Company 1. _______________________
(in order of preference) 2. _______________________
2. Name of the Members/firm along with name of partners forming proposed Management Consultancy Company
Firm Name/Member Name Firm Regn. No./M.No.
3. Address of the Registered Office of the proposed Management Consultancy Company
Tel. No. __________________________
Fax No. __________________________
Website Address ___________________
4. Ownership pattern of the Company
5. Name of the member proposing to become Managing Director/Whole-time Director/Manager
Name of the Member Membership No.
Place : ……………………… Name(s) with Membership No(s).
and signature(s) of duly authorized
Date : ……………………… Partner(s)/Proprietor(s) of the firms
DECLARATION FOR REGISTRATION OF MANAGEMENT CONSULTANCY COMPANY
THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
1. Name of the Management Consultancy Company
2. Address of the
(i) Registered Office
(ii) Branch Office
3. Ownership pattern of the Company
4. Name of the member(s) proposing to become Managing Director/Whole-time Director/Manager
Name of the Member Membership No.
5. Number and Date of Incorporation Certificate
(Please enclose Incorporation Certificate issued by the ROC)
I/We hereby declare that the Management Consultancy Company shall render Management Consultancy & Other Services which are prescribed by the Council of the Institute from time to time pursuant to powers under Section 2(2)(iv) of the Chartered Accountants Act, 1949. This Company has been constituted in compliance with the Guidelines for Practice in Corporate Form issued by the Institute.
I/We hereby declare that I/We shall comply with Clauses (6) & (7) of Part I of the First Schedule to the Chartered Accountants Act, 1949 and such other directions as may be issued by the Institute from time to time in this regard.
|Place : ……………………
Date : ……………………
Signatures of two authorised Directors of the body corporate and the Managing Director/Working Director of that body corporate together with his membership no. under a common seal and with a Board Resolution.
(Enclose a copy of Board Resolution)
(About the Author- Author was Member of ICAI- Regional Research Committee 2013-14 and ICAI- Committee For Direct Taxes 2011-12 and can be reached at email firstname.lastname@example.org or on phone Phone: 0 1 2 1-2 6 6 1 9 4 6. Cell: 9 8 3 7 5 1 5 4 3 2 having office at 1 1 5, Chappel Street, Meerut Cantt, UP, INDIA)