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March 25, 2021

New Network Guidelines by ICAI for CAs

by CA Shivam Jaiswal in Corporate Law, ICAI

New Network Guidelines by ICAI for CAs

1. Preamble

1.1 Over the years, our Members have adopted different models of practice viz.

  • Practice in individual name
  • Practice as a sole proprietary firm
  • Practice as a partnership / Limited Liability Partnership firm
  • Merger of two or more firms
  • Network firms

1.2 All the above forms of practice are recognised by the ICAI.

1.3 Amongst the above, networking is generally considered as the most effective platform for capacity building. It facilitates multi locational presence of the firm, strengthening partnerships and enhanced functioning of the CA firms. Though Members are at liberty to adopt any form of practice as they choose, it is overwhelmingly felt that to see exponential growth of one’s practice, Networking is one of the preferred choices.

1.4 In this context, the Council of ICAI issued Network Guidelines for the first time in the year 2005 and thereafter, the same was revised by the Council in the year 2011.

1.5 Members may note that the Council, at the present, is focussing on revision in Networking guidelines in order to enable the Indian CA firms to develop a sound Network of Firms, and after a gestation period, move towards allowing foreign firms to join the Indian CA networks. Therefore, this paper is limiting itself to networking amongst domestic CA firms only. At a later stage, the Council may consider further modifications in the present Networking Guidelines so as to pave way for Indian CA Networks to enter into networking arrangement with foreign accounting firms and have networking arrangements with foreign networks.

1.6 The previous guidelines did not fetch expected level of enthusiasm from members and only close to 100 networks could get registered with ICAI as on date. This threw up the need to review the Guidelines in order to make it more relevant and attractive in terms of current professional scenario.

1.7 Therefore, the Council of ICAI decided to modify the Guidelines to make it easier for the Indian CA firms to form network and also remove any impediments and bottlenecks that dissuade the firms from growing bigger by joining a network. Another equally critical concern was not only to protect the professional practice of the small and medium firms, but also their identity. Therefore, an attempt is made to mitigate the hardships in the revised Guidelines and encourage practising Members to consider Networking.

1.8 With the above intent in mind, the Council formed a Group of Council members in March, 2020 to have holistic review/ study of the Guidelines for Networking. The Group held several rounds of discussions and came out with a proposal to offer to the Members different options, which the Members can choose depending upon what suits them the best. The Council at its 396th meeting held in September-October, 2020 decided to conduct Outreach rogrammes, so that the views of Members be heard, collated and placed before the Council for approving the revised Guidelines.

1.9 Accordingly, Outreach Programmes were held in January, 2021 and views of members were collected. The same were considered by the Council at its 397th meeting held on 9th-11th January, 2021 at Kumarakom, Kerala and thereafter at its 398th meeting held on 9th-10th February, 2021 at New Delhi. Accordingly, the existing Guidelines have been revised and the same are given at Annexure I “The Guidelines for Alliance”, Annexure II “The Guidelines for Networking” (revised) & Annexure III “The Guidelines for Networking with Lead Firm concept” to this Paper.

1.10 The Council decided that the the existing Guidelines be revised in the light of above and brought into force from 9th February, 2021, and an appropriate ecosystem be developed in the Self Service Portal for registration and regulation of the Alliance, the Network and the Lead Firm in Network Models.

2. Concerns relating to growth of Indian CA firms

The practising CA firms in India have generally done well. The common features noticed with Indian CA profession are –

  • Majority CA firms are small sized firms.
  • A large number of firms have confined practice to audit and taxation

For more detail read below

Revised-Guidelines-for-Networking-of-Indian-CA-firms-2021_removed

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