FAQs: Can a Practicing CA become Director in a Company?

Can a Practicing Chartered Accountant become Director in a Company?

One of the most common question indeed!

Q1. Can a Practicing CA become a director in a company?

• Yes.

Q2. Is prior approval required to be obtained from Council by practicing CA to become a director in a company?

• Yes, in case of holding of office of a Managing Director or a whole time Director in a Company.
• No, in case of holding of office of an Independent Director.
• No, in case of Promoter/ Promoter Director.
• No, in case of holding office as Director Simplicitor.
• No, in case of directorship in ‘Management Consulting Company’ registered with ICAI, subject to Council Guidelines for corporate form of practice.

(Refer Explanations at the end for understanding of the terms used above.)

Q3. When cannot a practicing CA become director in a company?

• If s/he and/or his/her partners is interested in such a Company as an auditor.

Q4. Can a practicing CA hold the office of a managing director or a whole-time director in a company where s/he and/or any of his/her relatives hold substantial interest?

• No

Q5. How can a practicing CA hold the office of a managing director or a whole-time director in a company where s/he and/or any of his/her relatives hold substantial interest?

• By surrendering Certificate of Practice (CoP).

Q6. Can a practicing CA engaged as managing director or a whole-time director in any company perform attest function?

• No! In these cases where specific permission is granted by Council to hold the office as managing director or a whole-time director in a company, member will be regarded as being in part-time practice and cannot perform attest function.
• Yes, in case of ‘Management Consulting Company’ registered with ICAI, subject to Council Guidelines for corporate form of practice.

Q7. What is permissible in case of Promoter/ Promoter Director?

• There is no bar for a member to be a promotor/signatory to the Memorandum and Articles of Association of any Company.
• There is also no bar for such a promoter/signatory to be a Director Simplicitor of that Company irrespective of whether the objects of the Company include areas which fall within the scope of the profession of Chartered Accountants.

Q8. Can Director Simplicitor be engaged in routine affairs of the company?

• Absolutely not, as it would tantamount to engagement in any business or occupation other than the profession of Chartered Accountants without prior approval of Council.

Q9. Can a practicing CA become ‘Director Simplicitor’ in a company where the s/he and/or any of his/her relatives hold substantial interest?

• Yes

Q10. How can a practicing CA become a director while continuing to perform attest function?

• Independent Director
• Promoter Director
• Director Simplicitor
• Directorship in ‘Management Consulting Company’ registered with ICAI, subject to Council Guidelines for corporate form of practice.

Explanations to Terms used above –

1. Managing Director

• Any person who is designated as Managing Director in a company.
• As per section 2(54) of the Companies Act, 2013, where a person is not designated as a managing director, he can be deemed to be a managing director if he is entrusted with the whole or substantially the whole of the management of the affairs of the company.

2. Whole Time Director

• As per section 2(94) of the Companies Act, 2013, whole-time director is a director in the whole-time employment of the company.

3. Independent Director

• As referred under section 2(47) of the Companies Act, 2013.

4. Director Simplicitor

• The expression “Director Simplicitor” means an ordinary/simple Director who is not a Managing Director or Whole time Director and is required only in the Board Meetings of the company and not paid any remuneration except for attending such meetings.

5. Attest Function

• The Council in this connection clarified that the Attest function for this context would cover services pertaining to audit, review, certification, agreed upon procedures, and compilation, as defined in the Framework of Statements on Standard Auditing Practices and Guidance Notes on Related Services published in the July, 2001 issue of the Institute‘s Journal.
• A member who is not entitled to perform attest function shall not be entitled to train articled assistants.

(Source: Clause 11 of Part I of the First Schedule to the Chartered Accountants Act, 1949, related rules, resolutions, decisions and guidelines of the Council and related explanations and FAQs of Ethical Standards Board.)