Practical Aspects and Strategies of

Networking & Mergers

Presented by
Ashok K. Pradhan

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Network of small firms

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 Practical Framework of
Network

The framework for Network is as per Guidelines
issued by ICAI.

Network is coming together of two or more firms
to facilitate the better professional functioning of
the affiliate member firms.

A proprietary concern or a partnership firm can
be considered as a member firm.

The Network is formed by two or more Firms
registered with the ICAI.

The approval of name is carried out by filing of
Form “A”.

The Network is named by having the prefix
“Affiliates/Members of ………” before the name
of the network.
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 Practical Framework of
Network

The Network is registered by making an
Application in Form “B”. The Application has to
be signed by the Authorized Partners of all the
Firms constituting the Network.

Only 1 Network is permissible per Firm amongst
Indian firms.

The Network with a Foreign Firm is to be
registered by Filing of Form “D” with ICAI by the
Indian Firm.

Only 1 Network is permissible with a foreign
firm.

The withdrawal from the Network by any Firm
can be done by Filing Form “C”.
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Merger by Takeover

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 Practical Framework of
Mergers

The Rules of Merger & Demerger are as notified
by ICAI.

A Reconstituted Partnership Deed has to be
signed between all the partners of all the firms
getting merged.

The Merger takes place by Registration of a
Merger Agreement in Form “E” to be submitted
to ICAI. The Merger Agreement has to be Filed
within 30 Days of the Reconstituted Partnership
Deed.

Demerger can take place only if 75% or more of
the Partners agree to Demerge.

The Demerger takes place by Submission of
Form “F”. Demerger cannot take place after 5
Years of Merger.
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Merger by Integration

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 Difference Between Networks &
Mergers

Network is like Live in Relationship. There are

interse` set rules which are legally enforceable
and binding on the firms and the partners in a
network. A network generally adopts a set of
code of conduct called byelaws which are
incorporated into an Agreement for governing
the member firms of the network.

Merger is like a Marriage. It is a contract

marriage. The contract terms are legally
stipulated in the Reconstituted Partnership
Deed.

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 CA Firms Analysis

The scenario of the profession in India as per past
ICAI survey is approximately as follows:-
• No. of Members - 1,17,080
• No. of FCAs - 53,435
• No. of ACAs - 63,645

Sr.No Particulars Numbers %age

I Proprietary firms 34,505 72.68
II Partnership firms having 2 to 3 Partners 10,114 21.3
III Partnership firms having 4 to 10 Partners 2,742 5.78
IV Partnership firms having more than 10 118 0.24
Partners
Total 47,479 100.00

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Conclusions from Statistical Analysis

1. The Maximum Number of CAs are

Bachelors or Spinsters whose Spouses are
not CAs.
2. There are Maximum Number of Mom &
Pop Firms as evidenced by the large
number of Small Partnership Firms.
3. The Large sized firms are few & include
probably the big Multinationals also.

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 Strategy for Networks & Mergers

In order to have an orderly and

sustainable growth of the CA firms, it is
desirable that the coming together of
the firms begins with networking and
then matures to mergers.

Networking will enable the firms to
develop working relationships with
each other.

There can be mergers without
networking.
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 Strategy for Networks & Mergers

The mergers should be effected to

develop core competencies and to
render professional services of a larger
range spread over bigger geographical
areas.

A merged big entity will always be
superior to a network arrangement.

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 Networking Practical Aspects

Mission Statement : The perspective of different firms

could be varying. Goal congruence between a Sole
Proprietor and a Partner would be difficult.

Fees Sharing : The extent of fee sharing amongst the
different firms of a network would have to be based on
some rational and logical considerations. This may not
work when the matter is on pure referral basis.

Command Structure : There can be only one Captain.
Any organisation structure has to be headed by one
leader. The work emanating from one firm done by the
local network firm can bring vastly different results
due to management capabilities.
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 Networking Practical Aspects

Expense Budget : The expense control is the key to

surplus arising out of any assignment.

Partner Stability : The partners in a network firm
have to be stable. The frequent change of partners
can cause loss of client confidence.

Long Term Benefits : The Network has to be of a
long term duration. Only then recurring work will
result.

Immovable Properties : The immoveable properties
of the network firm have to be registered in the
names of the network partners. The names and the
extent of share of each firm is a ticklish issue.

CVK & Associates 14

 Merger Practical Aspects

Organisational Philosophy: The Merger results in

one firm. The constituent partnership firms get
dissolved into one body which is represented by the
reconstituted partnership deed.

Profit Sharing: The role of each partner is determined
by the seniority and the professional experience. The
corresponding profit sharing ratio is accordingly
determined.

Decision making Authority: The main partners of the
erstwhile merging firms were having decision
making authority in their respective firms. The
authority for making decisions will now be generally
given to a Managing Partner or to a Committee of
Partners.
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 Merger Practical Aspects

Limits on Partner Spending: The expense budgets of the
different partners will vary according to the nature of
assignments handled. However there will be a limit put on the
spending by each partner.

Partner Security: The merged firm being a larger firm, there
could be insecurity amongst the partners as to their duration as
partners.

Partners’ Retirement & Succession: Generally there is no super
annuation age in respect of family firms and sole proprietary
concerns. Post merger retirement age will have to be fixed. CA
sons’ succession issues will have to be tactfully handled.

Office Premises: The existing office premises would be in the
name of the partners of the pre-merger firms. These are
required to be transferred in the name of the new firm. The
issue of acquiring new office premises and the names of the
partners for this purpose is a difficult issue to sort out.
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 Delegate wise network areas

 PRACTICE AREA  REQUIREMENT

FOR NETWORK
1. Income-tax 1. Yes / No
2. Sales Tax 2. Yes / No
3. Service Tax 3. Yes / No
4. Excise 4. Yes / No
5. Conveyancing 5. Yes / No
6. Stamp Duty 6. Yes / No
7. Custom Duty 7. Yes / No
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 Delegate wise network areas

 PRACTICE AREA  REQUIREMENT

FOR NETWORK
8. Due Diligence 8. Yes / No
9. Information 9. Yes / No
System Audit
10.Tribunal 10. Yes / No
Representation
11. 11. Yes / No

12. 12. Yes / No

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Practical Aspects and Strategies of
Networking & Mergers

THANK YOU

Any Questions ?????

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