ICAI (Merger & Demerger of CA firms) Guidelines 2024 has been notified by the ICAI w.e.f. 31.01.2025
The guidelines provides for the modalities of mergers of CA firms to encourage and develop core competencies and to render professional services on a much larger geographical scale.
As per guidelines, a sole proprietary firm may merge with a sole proprietary, partnership and LLP firm. Likewise, a partnership firm can merge with another partnership and LLP firm. However, a LLP firm cannot merge with a sole proprietary or a partnership firm. However, individual practitioners (without firm/trade name) are not covered under these guidelines.
The guidelines provides the detailed procedure i.e. filing of forms, freezing of names, authorisation by partners, for merger and demerger of the firms.
It has been provided that the firms intending to merge are required to clearly lay down the terms and conditions of the demerger at the time of merger itself or as amended from time to time with the consent of all concerned at that time subject to the condition that it should not be contrary to the Act, Chartered Accountants Regulations, 1988 and merger and demerger guidelines or any other law.
The demerger will be permitted for such entities which have undergone merger in the past. Therefore, no acceptance is required from the continuing partners. The merger agreement shall stipulate that notwithstanding anything contained in the partnership deed to the contrary, 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 MDG 2 to the other partners of the old firm and to the Institute. The applicable provisions of other allied laws like LLP Act, 2008 should be dealt with at the firm‘s end.
The Demerged Firm/(s) is entitled to practice in its old trade name, which existed at the time of merger. The old trade/firm name can be obtained after 1 year and within 10 years from the date of merger subject to the provisions contained in chapter 3 of these guidelines.
Further, in case of events of death, insolvency, surrender of COP or any of the circumstances mentioned in the provisions contained in Section 20C of the Chartered Accountants Act 1949, the merged entity may not necessarily demerged.
The following formats have been prescribed
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Form MDG-1 |
Merger Agreement |
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Form MDG-2 |
Notice for Demerger |
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Form MDG-3 |
Unfreezing of firm name |
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