Chartered Accountants generally team up with Lawyers, Company Secretaries, Cost Accountants, Actuaries, Values, Software Professionals, Venture Capitalists, and Retired Entrepreneurs and execute their professional assignments by utilizing their services as employees or on a contractual basis. With the notification dated July 08, 2021, the revised Form 18 has been notified i.e. disclosure of particulars relating to office and firms under the Chartered Accountants Regulations, 1988 allowing Chartered Accountants to be a partner of Multi-Disciplinary firm, there are arguments in favour and against this notification. However, there were already many provisions of the act and regulations that were permitting its members to share the fees or profits with a number of other professions. Within a profession, there are provisions of networking where profit-sharing in partnership was allowed. The new coin of raising partnership with other professions is at par with the advantages of a Networking firm as one stop shop for expertise, experience, and efficiency, better reach, and services to the client. The new multidisciplinary partnerships certainly may have the advantage of professionally updating, immediate reference, and Multifaceted Knowledge experience. However, sharing profits with other professions is not a new one. There is a general perception that Chartered Accountants cannot share fees with others. This perception had made by the members because of various clauses of Part one Schedule one which prescribes that no chartered accountant can share its fees with anyone but that’s a factual perception.
Sharing of profits is allowed under the Chartered Accountants Act, 1949 and the Chartered Accountants Regulations, 1988. Regulation 53A(1) of the Chartered Accountants Regulations, 1988 covers the profit-sharing aspect with the members of prescribed professional bodies, and Regulation 53A(3) cover the profit-sharing aspect with the persons having prescribed professional qualifications. These Regulations allow profit-sharing even without entering into a partnership. The applicable provisions about Profit Sharing with Other professional bodies of the Chartered Accountants Regulations, 1988, are well-defined which says
(1) For the purposes of Items (2),(3) and (5) of Part I of the First Schedule to the Act, a person has to be a member of any of the following professional bodies, namely:-
(a) The institute of Company Secretaries of India established under the Companies Act, 1980 (No.56 of 1980);
(b) The institute of Cost and Works Accountants of India established under the Cost and Works Accountants Act, 1959 (No.23 of 1959);
(c) Bar Council of India established under the Advocates Act, 1961 (No.25 of 1961);
(d) The Indian Institute of Architects established under the Architects Act, 1972(No.20 of 1972);
(e) The institute of Actuaries of India established under the Actuaries Act, 2006(No.35 of 2006).
(2) The membership of the professional bodies or institutions outside India whose qualifications relating to accountancy are recognized by the Council under sub-section (2) of section29 shall also be taken into consideration for the purposes of Items (2), (3), and (5) of Part I of the First Schedule to the Act.(3) For the purposes of Items (2),(3), (4), and (5) of Part I of the First Schedule to the Act, the following shall be the persons qualified in India, namely:-
(i) Company Secretary within the meaning of the company Secretaries Act, 1980;
(ii) Cost Accountant within the meaning of the Cost and Works Accountants Act, 1959;
(iii) Actuary within the meaning of the Actuaries Act, 2006;
(iv) Bachelor in Engineering from a University established by law or an Institution recognized by law;
(v) Bachelor in Technology from a university established by law or an institution recognized by law;
(vi) Bachelor in Architecture from a University established by law or an institution recognized by law;
(vii) Bachelor in Law from University established by law or an institution recognized by law;
(viii) Master in business administration from Universities established by law or technical institutions recognized by All India Council for Technical Education.
Hence, as per the above-said Clauses of Part I of First Schedule to the Chartered Accountants Act, 1949 read with Regulation 53A of the Chartered Accountants Regulations, 1988, profit sharing with non-CAs is allowed.
For the purpose of ascertaining the openness of sharing the profits, we have to see the true soul of professional misconduct as defined in the Chartered accounts Act. Professional misconduct in relation to chartered Accountants in Practice” of the First Schedule to the Chartered Accountants Act, 1949 Aa chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he-
Part I: Clause (2):
Pays or allows or agrees to pay or allow, directly or indirectly, any share, commission, or brokerage in the fees or profits of his professional business, to any person other than a member of the Institute or a partner or a retired partner or the legal representative of a deceased partner, or a member of any other professional body or with such other persons having such qualifications as may be prescribed, for the purpose of rendering such professional services from time to time in or outside India. In this item, “partner” includes a person residing outside India with whom a chartered accountant in practice has entered into a partnership which is not in contravention of the item (4) of this Part;
Part I: Clause (3):
Accepts or agrees to accept any part of the profits of the professional work of a person who is not a member of the Institute: Provided that nothing herein contained shall be construed as prohibiting a member from entering into profit sharing or other similar arrangements, including receiving any share commission or brokerage in the fees, with a member of such professional body or other person having qualifications, as is referred to in item (2) of this Part;
Part I: Clause (4):
Enters into partnership, in or outside India, with any person other than a chartered accountant in practice or such other a person who is a member of any other professional body having such qualifications as may be prescribed, including a resident who but for his residence abroad would be entitled to be registered as a member under clause(v) of sub-section (1) of Section 4 or whose qualifications are recognized by the Central Government or the Council for the purpose of permitting such partnerships;
Part I: Clause (5):
Secures, either through the services of a person who is not an employee of such chartered accountant or who is not his partner or by means which are not open to a chartered accountant, any professional business: Provided that nothing herein contained shall be construed as prohibiting any arrangement permitted in terms of items (2), (3)and (4) of this Part;
Professional misconduct in relation to members of the Institute in service A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he is an employee of any company, firm or person− (1) pays or allows or agrees to pay directly or indirectly to any person any share in the emoluments of the employment undertaken by him; (2)accepts or agrees to accept any part of fees, profits or gains from a lawyer, a chartered accountant or broker engaged by such company, firm or person or agent or customer of such company, firm or person by way of commission or gratification.
There is an old saying that Ethics to be effective should be followed in letter and spirit; the same is the case of the Professional Ethics Code of Ethics. The same should be understood, agreed and followed in full spirit as applicable to all the members of the Institute whether or not they hold COP as mentioned in Part I and for members not holding COP and are in service or no COP even though applicable clauses are limited as mentioned in part II, utmost care should be taken by them particularly in view of the inclusion of any other conduct under any circumstances (other misconduct) within the scope of the disciplinary action
Regulation 53A is applicable for a CA in practice or a firm of CA in practice who want to share fees or accept sharing of fees from the members of prescribed professional bodies or persons having prescribed professional qualification even without entering into a partnership. Regulation53B is applicable to a CA in practice or a firm of CAs in practice who want to enter into a partnership with members of prescribed professional bodies. The other professions list is the common with the exception that MBAs are not covered in the list of persons mentioned in Regulation 53B of the Chartered Accountants Regulations, 1988.
|Particulars||53 A- Sharing of Profits||53-B Partnership|
|Members of Institutes|
|Company Secretary||ALLOWED||NOT ALLOWED|
|Cost Accountant||ALLOWED||NOT ALLOWED|
|Bachelor in Engineering||ALLOWED||NOT ALLOWED|
|Bachelor in Technology||ALLOWED||NOT ALLOWED|
|Bachelor in Architecture||ALLOWED||NOT ALLOWED|
|Bachelor in Law||ALLOWED||NOT ALLOWED|
|Master in Business Administration||ALLOWED||NOT ALLOWED|
Partnership The above-mentioned latest notification of July 2021 opens a way to have partnerships with the prescribed qualifications for eligible partner members of the other institutions.
(a) Company Secretary, member, The Institute of Company Secretaries of India, established under the Company Secretaries Act, 1980;
(b) Cost Accountant, member, The Institute of Cost and Works Accountants of India was established under the Cost and Works Accountants Act, 1959;
(c) Advocate, member, Bar Council of India established under the Advocates Act,1961;
(d) Engineer, member, The Institution of Engineers, or Engineering from a university established by law or an Institution recognized by law.
(e) Architect, member, The Indian Institute of Architects established under the architects Act, 1972;
(f) Actuary, member, The Institute of Actuaries of India, established under the actuaries Act, 2006.
(g) Professional bodies or Institutions outside India whose qualifications accountancy is recognized by the Council under sub-section (2) of section 29of the Act. Section 29 talks about the reciprocity (1) where any country, specified by the Central Government on this behalf by notification in the official Gazette prevents persons of Indian domicile from becoming members of any institution similar to the Institute of Chartered Accountants of India from practicing the profession of accountancy or subjects them to unfair discrimination in that country, now the subject of any such country shall be entitled to become a member of the Institute or practice the profession of accountancy in India. (2) Subject to the provisions of sub-section (1), the Council may prescribe the conditions, if any, subject to which foreign qualifications relating to accountancy shall be recognized for the purposes of entry in the Register.
Hence, it is interesting to note that a Chartered Accountant in practice can share the fees or profits even with the bachelor of various streams but required memberships and practicing certificate of their related professions to become partners with Chartered Accountants. Further attention is drawn towards deeming fiction u/s 2(2) where the member is deemed to be in practice when (for remuneration)he offers to perform or perform auditing services or render accounting services or Management Consultancy services unless he is a full-time salaried employee or holding COP of other institutes and then all the COE for practicing members will be applicable to such member even if he doesn’t hold COP.