Saturday, June 4, 2011

CA firms with LLPs can now act as statutory auditors

(The following post is contributed by Rohan Bagai)
A limited liability partnership (LLP) of chartered accountants (CAs) can now act as a statutory auditor of a company notwithstanding Section 226 (3) (a) of the Companies Act, 1956, which stipulates that a ‘body corporate’ is disqualified from such an appointment.
In this regard, the Ministry of Corporate Affairs (MCA) has recently issued a clarification vide General Circular No. 30A/2011 that detaches LLPs of CAs from the definition of ‘body corporate' for the limited purpose of Section 226(3) (a) of the Companies Act.
The release comes pursuant to representations from the Institute of Chartered Accountants of India (ICAI) to the MCA wherein ICAI had submitted that an LLP of CAs being a ‘body corporate’ under Section 3 (1) of the Limited Liability Partnership Act, 2006 would not be qualified for appointment as auditor by a company.
This Government move is sure to trigger conversion of CA firms into LLPs by seeking to address the limit on the number of partners (which is presently restricted to a maximum of 20 partners under the Partnership Act, 1932). More so, this would enable these firms to form multidisciplinary LLPs with cost and works accountants, company secretaries, lawyers as well as chartered engineers whilst suitable amendments are being carried out in the legislations governing their regulators like the ICAI, the Institute of Company Secretaries of India (ICSI) and the Institute of Cost and Works Accountants of India (ICWAI).
- Rohan Bagai

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