(Engaging in Other Business………)
Shrikrishna (S) – Arey Arjun, Why are you looking so tired? Your pressure of September is still not over?
Arjuna (A) – September is over; but not our pressure.
S – I am sure, the Dandiya was keeping you busy late night.
A – Kaash! CAs were that fortunate!
S – Why? What happened?
A – By 30th September, returns were e-filed. But now we are signing all balance-sheets and reports. Besides, I have to do so many things for this Diwali.
S – Why? For CAs, what is special about Diwali?
A – Diwali has nothing to do with my practice. But that other business of mine! That consumes lot of my time.
S – What business?
A – Don’t you know? We are into trading of construction material. We have a few agencies.
S – We means who?
A – My wives Droupadi and Subhadra. They are directors but I only have to manage everything. It is our family business.
S – What do you mean by family business? Was it started by your father Pandu Chacha?
A – No. I only started it. I am also a director in Bhima’s company. Bhima runs a gym.
S – And what do you do in your business?
A – Get orders, procure material, manage the workers, look after Government authorities – and what not!
S – Have you sought your Council’s permission?
A – What for? In my business, I am just shown as a manager. My wives are directors and I draw only remuneration. In Bhima’s company, I look after administration. Actually, Nakula and Sahadeva want me to become a partner in their firm. They are into share-trading.
S – For Dharma’s sake, please don’t do that! Council does not permit all this.
A – I have already thought of it. I will become partner in my HUF capacity. Simple!
S – When you were a student in Guru Dronacharya’s school, you were very brilliant and focused. You could see only one single eye of the fish! But now, I find that you are simultaneously looking at so many things – except your profession and its ethics!
A – Why? What’s wrong?
S – Firstly, remember, an HUF as such can never be a partner. Only an individual or a company can be partners. – either a natural person or a legal person.
A – But HUF is also a person.
S – You are not able to think of any law except the Income Tax Act. Partnership is governed by Partnership Act and not by tax laws.
A – But I have formed firms where same individual is partner in both capacities – that is himself and also as Karta. None else.
S – Anyway, that’s a separate topic. Council will not recognise any activity under socalled HUF, if it is not a genuinely ancestral business.
A – This is very unfair. If I am serving my clients well and they don’t have any complaints, why should the Council come in the way? How is it concerned?
S – See, the council has two major concerns. Firstly, your profession is very demanding. It requires continuous update of knowledge. Council feels that you should pay undivided attention to the profession.
A – Ah! I can manage all things simultaneously.
S – If that is so, why are you signing the hard copies of balance sheet now, after the returns are e-filed?
A – OK. What is the other point?
S – Remember; as a businessman, you are likely to invite lots of risks and liabilities. Due to the financial or other worries, you may often compromise on your principles. That is most dangerous. Your quality of work then suffers. Moreover, doing certain businesses may hamper the dignity of your profession. And under the guise of promoting your business, you may even advertise your profession. This is unfair and not desirable.
A – Yes, Sometimes I also lose my patience and don’t feel like attending office, if I have to execute orders and manage the funds for business. But then, I have heard that the Council allows us to become a director in a company.
S – You are right. You can even be a promoter; and also a director in a board-managed company. But you cannot be an executive director.
A – What do you mean by that?
S – You can be only a ‘Director Simplicitor’. You may attend board meetings, participate in discussions; but cannot be involved in execution.
A – Can I sign cheques?
S – Council says, ‘no’. You should not sign any documents, bills, contracts, letters and the like.
A – This is strange. But I know many CAs who have a private limited company with only two directors – only husband and wife.
S – Then they must be signing the balance sheet also! – That is also not looked at with favour by the Council. Unfortunately, nowhere it is defined as to what amounts to ‘engaging in a business’.
A – And many CA friends of mine are doing regular trading in shares.
S – Blissful ignorance! You said you draw remuneration as Manager.
A – Yes. I am showing it in my income. What’s wrong?
S – You have to seek permission from the Council for any employment – be it full time or part – time. Even college lecturers have to seek permission.
A – And then what happens?
S – See, there is a prescribed application form, Council examines how much time you are required to devote for the other occupation. What are your financial stakes, and so on.
A – You mean I should have obtained permission?
S – Yes, obviously. And then, you will be treated as in part time practice.
A – So what?
S – You cannot then do attest function – cannot sign balance sheets as auditor! And cannot keep articled trainees.
A – Oh my God!
S – There is a recent real story. Mr. A was a CA who did active business in a private limited company in which his friend B, an engineer was the other director. There were the only two of them. B’s son completed articleship with A and passed his CA.
A – Then?
S – There was a serious dispute and litigation between A and B, and ‘B’s son filed a complaint against his own ex-boss ‘A’ that he was an executive director.
A – How ungrateful! Complaint against his own Guru!
S – Yes, And the Guru was held guilty of professional misconduct!
A – For each and everything, one has to approach the Council?
S – No, Council has announced certain general permissions and certain items require special permission. That is Regulation 190A.
A – Now, what do I do?
S – Better withdraw your name from everywhere. Stop signing any documents of business at once. And don’t join Nakula and Sahadeva as a partner.
A – Then who will sign the balance sheet of Bhima’s company?
S – Better induct someone. It always happens – many CAs start business knowingly or unknowingly. They avoid taking permission. Afterwards, when they come to know the seriousness, they are afraid of approaching the Council.
A – Then, what should they do?
S – Either stop the other activity; or approach the Council. Better late than never. Voluntary application may prove your bonafides.
A – Bhagwan, I forgot to mention one small thing. I have an agency of LIC ; but it is in Subhadra’s name; and a sub-brokership in Droupadi’s name.
S – Do they really do it themselves? Do they really know the business?
A – No, I have their Power of Attorney to do everything.
S – Then better take your own insurance! Also enquire about professional indemnity insurance. Dear Arjun, I saved you many times in Mahabharata War; But with your Council, I wonder whether I will be able to help.
A – How can you say so? You are God – Omni potent and Omniscient.
S – True. But I save only honest and righteous people. Not those who compromise on ethics.
‘Om Shanti’.
NOTE :
The above dialogue is with reference to Clause 11 of the First Schedule which reads as under:
Clause (11) : engages in any business or occupation other than the profession of chartered accountants unless permitted by the Council so to engage:
Provided that nothing contained herein shall disentitle a chartered accountant from being a director of a Company, (not being a managing director or a whole time director), unless he or any of his partners is interested in such company as an auditor;
Further, readers may also refer pages 211 to 225 of ICAI’s publication on Code of Ethics, January 2009 edition (reprinted in May 2009)
