Presidential assent given to Chartered Accountants, the Cost and Works Accountants, and the Company Secretaries (Amendment) Act, 2021 [Read Notification]

The President of India, Ram Nath Kovind has given to the Chartered Accountants, the Cost and Works Accountants, and the Company Secretaries (Amendment) Bill, 2021.

The Bill amends the Chartered Accountants Act, of 1949, the Cost and Works Accountants Act, of 1959, and the Company Secretaries Act, of 1980. It changes the disciplinary mechanism under the three Acts and specifies timelines for disciplinary proceedings.  It also provides more external representation on the Board of Discipline and Disciplinary Committee.

The Bill creates a Coordination Committee headed by the Secretary of the Ministry of Corporate Affairs.  The Committee will have representation from the three Institutes formed under the Acts. The Secretary to each Council will be designated as chief executive with the President as the head of the Council.  The President will be responsible for ensuring the implementation of decisions of the Council.

Firms must now register with the Institutes.  The Councils must maintain a register of firms containing details including pendency of any actionable complaint or imposition of penalty. The Bill increases certain fines under the three Acts.  If a partner or owner of a firm is repeatedly found guilty of misconduct during last five years, disciplinary action can be taken against the firm.

Key Features 

Disciplinary Mechanism

• Under the Acts, the respective Councils of the three Institutes must each constitute a Disciplinary Directorate, headed by a Director (Discipline) who is an officer of the Institute.  Depending on the misconduct, after receiving a complaint, the Director places the matter before the Board of Discipline or the Disciplinary Committee.  The Bill seeks to empower the Directorate to initiate investigations suo motu against members or firms.  
   
• Each Council constitutes a Board of Discipline.   Members of the Board include (i) Presiding Officer (having experience in law and knowledge of disciplinary matters), (ii) two members, and (iii) Director (Discipline) as Secretary.  The Bill empowers the three Councils to constitute multiple Boards.  The presiding officer and one of the two members must not be a member of the institutes and will be nominated by the central government from a panel of persons provided by the Councils.
   
• Under the three Acts, the Councils constitute Disciplinary Committees consisting of (i) Presiding Officer (President or Vice-President of the Council), (ii) two members elected from the Council, and (ii) two members nominated by the central government.  The Bill amends the Acts to provide that the Presiding Officer must not be a member of the institutes and shall be nominated by the central government from a panel of persons provided by the Councils.

Role of the President of the Council

• The CA Act specifies the President of the Council as its chief executive authority while the other two Acts provide for an officer of their Councils or Institutes to be designated as chief executive.  The Bill makes the secretaries of the Councils to be the respective chief executives, and the President to be responsible for ensuring that the decisions taken by the Council are implemented.

Coordination Committee

• The Bill provides for setting up a Coordination Committee headed by the Secretary of the Ministry of Corporate Affairs.  The President, Vice-President, and Secretary of the three institutes will also be included in the Coordination Committee.  Its functions will include: (i) quality improvement of academics, (ii) coordinating and collaborating among the professions, and (iii) making recommendations on regulatory policies for the professions.  

Registration of firms

• The Bill adds that firms must register with the Institutes by making an application to the respective Councils of the Institutes.  The Councils must maintain a register of firms containing details such as the pendency of any actionable complaint or imposition of penalty against the firms.

Penalties

• Under the Acts, in cases of professional or other misconduct, the Disciplinary Committees may: (i) reprimand or remove the member from the register of the Institute, or (ii) impose a fine of up to five lakh rupees.  The Bill increases the maximum amount of fine to Rs 10 lakh.  The Bill also adds that if a partner or owner of a firm is repeatedly found guilty of misconduct during the last five years, the Disciplinary Committee may take certain actions against the firm.  The actions include (i) prohibiting the firm from undertaking activities related to the profession of chartered account, cost accountant, or company secretary, as the case may be, for up to two years, or (ii) imposing a fine of up to Rs 50 lakh.

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