Practical Aspects and Strategies of

Networking & Mergers

Practical Aspects and Strategies of

Networking & Mergers

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Networking & MergersPresented byAshok K. Pradhan

Networking & MergersPresented byAshok K. Pradhan

Network of small firms Network of small firms

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Practical Framework of Network

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 o f the affiliate member firms.� A proprietary concern or a partnership firm can

be considered as a member firm.

� 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 o f the affiliate member firms.� A proprietary concern or a partnership firm can

be considered as a member firm.

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� 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.

� 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.

Practical Framework of Network

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 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.

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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”.

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”.

Merger by TakeoverMerger by Takeover

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Practical Framework of Mergers

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

� 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

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� 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.

� 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.

Merger by IntegrationMerger by Integration

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� 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

� 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

Difference Between Networks & Mergers

Difference Between Networks & Mergers

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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.

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.

CA Firms AnalysisCA 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

� 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

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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 Partners

118 0.24

Total 47,479 100.00

Conclusions from Statistical AnalysisConclusions 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 &

1. The Maximum Number of CAs are Bachelors or Spinsters whose Spouses are not CAs.

2. There are Maximum Number of Mom &

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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.

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.

Strategy for Networks & MergersStrategy 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.

� 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.

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then matures to mergers. � Networking will enable the firms to

develop working relationships with each other.

� There can be mergers without networking.

then matures to mergers. � Networking will enable the firms to

develop working relationships with each other.

� There can be mergers without networking.

Strategy for Networks & MergersStrategy for Networks & Mergers

� The mergers should be effected to develop core competencies and to render professional services of a larger

� The mergers should be effected to develop core competencies and to render professional services of a larger

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render professional services of a larger range spread over bigger geographical areas.

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

render professional services of a larger range spread over bigger geographical areas.

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

Networking Practical AspectsNetworking 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

� 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

CVK & Associates 13

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.

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.

Networking Practical AspectsNetworking 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

� 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

CVK & Associates 14

� 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.

� 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.

Merger Practical AspectsMerger 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

� 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

CVK & Associates 15

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.

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.

Merger Practical AspectsMerger 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.

� 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.

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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.

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.

Delegate wise network areasDelegate wise network areas

� PRACTICE AREA

1. Income-tax2. Sales Tax

� PRACTICE AREA

1. Income-tax2. Sales Tax

� REQUIREMENT FOR NETWORK

1. Yes / No2. Yes / No

� REQUIREMENT FOR NETWORK

1. Yes / No2. Yes / No

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2. Sales Tax3. Service Tax4. Excise5. Conveyancing6. Stamp Duty7. Custom Duty

2. Sales Tax3. Service Tax4. Excise5. Conveyancing6. Stamp Duty7. Custom Duty

Yes / No3. Yes / No4. Yes / No5. Yes / No6. Yes / No7. Yes / No

Yes / No3. Yes / No4. Yes / No5. Yes / No6. Yes / No7. Yes / No

Delegate wise network areasDelegate wise network areas

� PRACTICE AREA

8. Due Diligence9. Information

� PRACTICE AREA

8. Due Diligence9. Information

� REQUIREMENT FOR NETWORK

8. Yes / No9. Yes / No

� REQUIREMENT FOR NETWORK

8. Yes / No9. Yes / No

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9. Information System Audit

10.Tribunal Representation

11.

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9. Information System Audit

10.Tribunal Representation

11.

12.

9. Yes / No

10. Yes / No

11. Yes / No

12. Yes / No

9. Yes / No

10. Yes / No

11. Yes / No

12. Yes / No

Practical Aspects and Strategies of Networking & Mergers

Practical Aspects and Strategies of Networking & Mergers

THANK YOUTHANK YOU

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Any Questions ?????Any Questions ?????