Professional Partnership Firms (CA CMA CS) governed by special acts can be registered / reconstituted with more than 20 partners under Companies Act, 2013

Under the section 11 of the old Companies Act, 1956, no association or partnership consisting of more than twenty persons was allowed to be formed. However Under section 464 (1)(b) of the Companies Act, 2013, the restriction on the number of maximum number of partners has been made inapplicable to an association or partnership, if it is formed by professionals who are governed by special Acts. Accordingly professional firms/LLP of CAs, Cs, CMA can now be registered with more than twenty members.

Institute of Chartered Accountants of India has issued the following advisory in this regard:

Raising of number of partners in CA Firm with reference to the provisions of Companies Act, 2013 The Council of the Institute has clarified that the earlier restriction of maximum of 20 partners  permitted for firms under section 11 of the Companies act, 1956 is no more applicable to the firms as Section 464 of the Companies Act, 2013 has been notified w.e.f 01-04-2014 wherein sub-section (1) provides for a maximum number of partners permissible for business firms at 100 and sub-section (2) provides that nothing in sub section (1) shall apply to an association or partnership, if it is formed by professionals who are governed by special Acts. Accordingly, as per proviso to the said section, Chartered Accountants firms are now allowed to be registered/reconstituted with more than 20 partners w.e.f  01-04-2014 under the Indian Partnership Act as in the case of a firm under the Limited Liability Partnership Act. Sd/ Joint Secretary M&C-MSS Date: 26th August, 2014

The text of section 464 of the Companies Act, 2013

464. Prohibition of association or partnership of persons exceeding certain number

(1) No association or partnership consisting of more than such number of persons as may be prescribed shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association or partnership or by the individual members thereof, unless it is registered as a company under this Act or is formed under any other law for the time being in force:

Provided that the number of persons which may be prescribed under this sub-section shall not exceed one hundred.

(2) Nothing in sub-section (1) shall apply to—

(a) a Hindu undivided family carrying on any business; or

(b) an association or partnership, if it is formed by professionals who are governed by special Acts.

(3) Every member of an association or partnership carrying on business in contravention of sub-section (1) shall be punishable with fine which may extend to one lakh rupees and shall also be personally liable for all liabilities incurred in such business.

Section 11 of the Companies Act, 1956

11. Prohibition of Associations and Partnerships Exceeding Certain Number

(1) No company, association or partnership consisting of more than ten persons shall be formed for the purpose of carrying on the business of banking, unless it is registered as a company under this Act, or is formed in pursuance of some other Indian law.

(2) No company, association or partnership consisting of more than twenty persons shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the company, association or partnership, or by the individual members thereof, unless it is registered as a company under this Act, or is formed in pursuance of some other Indian law.

(3) This section shall not apply to a joint family as such carrying on a business; and where a

business is carried on by two or more joint families, in computing the number of persons for the purposes of sub-sections (1) and (2), minor members of such families shall be excluded.

(4) Every member of a company, association or partnership carrying on business in contravention

of this section shall be personally liable for all liabilities incurred in such business.

(5) Every person who is a member of a company, association or partnership formed in contravension of this section shall be punishable with fine which may extend to one thousand rupees.