Page 187 - Quick Insights Book 2022

Ann. 15 – ICAI Rules of Merger & Demerger of CA Firms

and in 223rd Meeting held from 2nd to 5th February, 2002 considered the Seniority and Mergers of the firm and
implications of the decisions, are enclosed in Tabular form.

(iii) 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. However, it is not to suggest that there cannot be mergers without networking.
(iv) The mergers should be effected to develop core competencies and to render professional services of a larger range
spread over bigger geographical area. A merged big entity will always be superior to a network arrangement.
3. Merger
(i) To effectuate merger, a merger agreement in Form `E’ (enclosed) is to be filed with the Institute within 30 days
from the date of the agreement. The re- constitution agreement/partnership deed shall be filed with the Registrar of
Firms.

(ii) Upon the merger of the firms, the Institute will freeze the names of the merging firms and shall not allot the same
names to any other firm.

4. Demerger
(i) The merger has to precede the demerger. The merger agreement itself shall contain the terms and conditions for
demerger. Therefore no concurrence/acceptance is required from the continuing partners. The merger agreement shall
stipulate that in case 75% or more of the continuing partners of one of the erstwhile firm(s) are willing to demerge
then they can do so after giving due notice in Form `F’ (enclosed) to the other partners and to the Institute.

(ii) In case 75% or more of the continuing partners of one of the erstwhile merging firm have demerged after giving
due notice to the other partners, then in such case, the merger shall come to an end and if the remaining erstwhile
merging firms/partners of the erstwhile merged firm decided to continue, then they should enter into a fresh Merger/
Partnership Agreement.

(iii) The Demerged Firm is entitled to practice in its old trade name, which existed at the time of merger.
(iv) The Constitution Certificate issued by the Institute to the demerged firm shall state the original date of establishment,
the date of its merger and the date of the demerger. For the purpose of computing the seniority of the firm, the total
period will be reckoned from the original date of establishment.

(v) The demerger can be demanded within a period of 5 years from the date of merger.
Council Decision on Change in Firm name/Seniority of firms
Prepared on the basis of Council Decisions of 198th Meeting held from 25-27th February, 1999 & 223rd Meeting held from 2 - 5th
February, 2002.
PARTICULARS OF CASES: SENIORITY DATE OF EFFECT
I Proprietor of firm:

A member practicing as a sole proprietor in a
trade name, admits one or more members as
partners thereby constituting a firm, and
i. the firm name is the same trade name The date of establishment of practice in the trade 27.2.1999
name
ii. the firm name is different from the trade name The date of approval of the firm name or the date or 27.2.1999
establishment of the firm in the firm name, whichever
is later
II Death of the individual member
If the member practicing in a trade name dies
and if the trade name is sold/assigned to another
member and if the other member practices (either
as sole proprietor or in partnership with others)
immediately after such sale/assignment

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