The Board of Discipline of the Institute of Chartered Accountants of India ( ICAI ) has recently held that a Chartered Accountant in practice can be a Director Simpliciter or Professional Director, without being charged guilty of professional misconduct.
The Ministry of Corporate Affairs discovered during an inspection of the company’s records that CA. Girish Ravindra Amonker had served as a director between 01/09/2018 and 22/03/2014 without obtaining permission from ICAI. The Inspecting Officer asked Amonker to provide evidence of the permission, but Amonker failed to do so.
In addition, during the same period, the Respondent held a full-time Certificate of Practice and served as the Executive Director in the Company without obtaining specific permission from the Council of ICAI.
The Institute of Chartered Accountants of India began disciplinary proceedings against the Respondent and requested that he submit documents related to his appointment.
However, when the Respondent submitted the documents, an incorrect Form 32 that mistakenly identified the Respondent as an ‘Executive Director’ was included. As a result, the disciplinary action was initiated against the Respondent for serving as an ‘Executive Director,’ even though he had actually served as an ‘Independent professional Director’ on the Board of Directors. The company had other directors who managed the business, and the Respondent did not receive any remuneration, Sitting fees, or Professional fees during his tenure.
In this regard, the Board took into view Regulation 190A of Chartered Accountants Regulations, 1988, which deals with the provision for Chartered Accountants in practice not to engage in any other business or occupation, and the same reads as below:
‘CA Chartered Accountant in practice shall not engage in any business or occupation other than the profession of accountancy, except with the permission granted in accordance with a resolution of the Council”.
It was observed that “The permissible categories of engagements approved by the Council under Regulation 190A, are available in Appendix No. 9 to the Chartered Accountants Regulations, 1988. Further, a Member in Practice shall be permitted to be a Director (Director Simpliciter), Promoter/Promoter Director, Subscriber to the Memorandum and Articles of Association of any company including a Board Managed Company.”
It was also clarified that “expression ‘Director Simplicitor’ shall be used for an ordinary/simple Director, who fulfills the following conditions :
(a) he is required to attend the Board meetings only.(emphasis provided)
(b) He will not be paid any remuneration except the Sitting Fees for attending the Board meetings; and
(c) He will be devoting his time for the company only to attend Board meetings and not for any other purpose. (emphasis provided)”
The ICAI Board of Discipline further held, “A Member in Practice is permitted generally to be a Director Simpliciter in any Company including a Board-Managed Company and as such he is not required to obtain any specific permission of the Council in this behalf irrespective of whether he and/or his relatives hold substantial interest in that Company.”
Further, there is no bar for a Member to be a Promoter/Signatory to the Memorandum and Articles of Association of any Company. There is also no bar for such a promoter/signatory to be a Director Simpliciter of that Company irrespective of whether the objects of the Company include areas which fall within the scope of the profession of Chartered Accountancy. Therefore, members are not required to obtain specific permission of the Council in such cases.
The respondent, as a result, in the considered opinion of the Board, is not guilty of Professional Misconduct falling within the meaning of Item (11) of Part I of the First Schedule to the Chartered Accountants Act, 1949.
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