PREPARED BY CA LALIT BAJAJ

NETWORKING

� Objective & Needs of Networking

� Types of Networking

� Benefits of Networking

� Formal Network

� Referal Practice

OBJECTIVES & NEEDS OF NETWORKING

� To overcome the space constraints

� Cost & time effective service

� To satisfy the multi-locational clients

� To Provide & accelerate multi-disciplinary services

� Empowering the small firms

� Consolidation of small & medium firms

TYPES OF NETWORKING

� Formal Networking

� Networking amongst the firms registered with the regulatory body of a member country

� Networking between the firms registered with the regulatory body of the member country & Multinational Accounting Firms (MAF)

� Referral Practice is not Networking

BENEFITS OF NETWORKING

� Cost & Time effective service

� Utilization of combined strength

� Multi-locational & Multi-disciplinary Services

� Dissemination of Professional Expertise & Experience

� Training & Sharing Methodologies

� Networking will lead to Merger of Firms

� Like seniority of firms, the seniority of Network will be counted and will help in long run.

� The firms which are proactive in forming Networkwould be more beneficial in terms of experience,work assignments, identity.

Formal NetworkFormal Network means a network amongst two or morefirms registered with The Institute of CharteredAccountants of India (ICAI), where the object of network isto use the collective resources of the affiliates for executionof professional services of one or more type at one and/orat multi-locational points. The resources would includefinancial, technical and other logistic support required toexecute the professional assignments. In such type ofnetwork, the common resources may be pooled andexhibited together before the service user as thosebelonging to one particular set of professionals.

Referal PracticeReferal Practice means a practice to refer professionalwork by a firm to one of its associate/affiliate eithersituated at a different place or rendering professionalservices not provided by it, to the user of the service.The pre-domain objective of such a network is not topool in their collective resources and exhibit them asthose belonging to one particular set of professionals.

Name of Network�To distinguish a “Network” firm a “firm” of CharteredAccountants, the words “&Affiliates” should be usedafter the name of the network and the words “&Co.”/”&Associates” should not be used.

�The network should neither be permitted to advertisenor to use logo. The firms constituting the networkare permitted to use the words “Affiliates/Members of………” (a network of Indian CA firms) on theirprofessional stationery.

� Introduction

� Merger – Tool for consolidation

� Demerger – A tool to facilitate Merger

INTRODUCTION

�In the Corporate world, merger and demerger havebecome universal practices for securing survival,growth, expansion and globalisation of enterpriseand achieving multitude objectives.

�Merger is the fusion of two or more existingcompanies.

�On the other hand, demerger signifies a movementin the company just opposite to merger.

�To incorporate the spirit of Corporate World and toimbibe the consultation creed, probably the Councilof ICAI used the term `merger’ and `demerger’ ofC.A. Firms.

MERGER – TOOL FOR CONSOLIDATION

�In order to have an orderly and sustainablegrowth of CA Firms, it is desirable that the comingtogether of the firms begins with networking andthen matures to mergers. Networking will enablethe firms to develop working relationships witheach other. Once the firms have developedsufficient confidence in each other then they canventure into a marriage which is the form ofmergers. However, it is not to suggest that therecannot be mergers without networking.

o Merger Agreement has to be filed with the Institutewithin 30 days from the date of Agreement.

o The Reconstitution Agreement/Partnership Deed shallbe filed with the Registrar of Firms.

o After the merger of the firms, the Institute will freezethe names of the merging firm and shall not allot thesame names to any other firm.

�The mergers should be effected to develop corecompetencies and to render professional services of alarger range spread over bigger geographical area. Amerged big entity will always be superior to anetwork arrangement. A network of such biggerentities will lead to formation of bigger firms in nearfuture.

DEMERGER–A TOOL TO FACILITATE MERGER

�The advantage of a formal merger is the ability todemerge which will be formally recognised by theInstitute. One of the impediments for the growthof the firms is that once a merger takes placethere is no exit route. The merged entity loosesits trade name and also its seniority forever. Thereis always a lurking feat that the pre-merger cordialrelations may not continue after the merger. Inthe event of such fear coming true then themerging firm will be in a situation of having losteverything that it had before merger.

�It is the fear that acts as a barrier in the process ofmerger of firms.

�The merger had to precede the demerger.Demerger cannot be used as a hanging sword onthe merged entity. Therefore to balance outbetween the two opposite issues i.e., (a) the needto demerge and (b) the probable misuse of thisright to demerge, it is prescribed that the demergerin the manner can be demanded only within aperiod of 5 years from the date of merger.

�The clear rules of demerger will facilitate themerger.

• In case of 75% or more of the continuing partners of oneof the erstwhile merging firm have demerged after givingdue notice to the other partners, then in such case, themerger shall come to an end and if the remainingerstwhile merging firms/partners of the erstwhile mergedfirm decided to continue, then they should enter into afresh Merger/Partnership Agreement.

• The Merger Agreement shall contain the terms andconditions for Demerger.

• The Merger Agreement shall stipulate that incase75% or more of the continuing partners of one of theerstwhile firms are willing to demerge, then they maydo so after giving due notice to other partners & tothe Institute.

• The demerged firm will entitled to practice in its oldtrade name.

THANK YOU

By CA LALIT BAJAJ

Mob. 9867692321

Email: lalitbajaj179@gmail.com