Almost every Indian company – and a number of Indian individuals as well – deal with a Chartered Accountant (CA) to manage, track and optimise their financial matters related to:
- Income Tax returns filing
- Financial planning and advice
- GST registration
- GST returns filing
- Tax audits, etc.
This is because a qualified CA has the necessary knowledge, training and experience to:
- Give advice (financial and/or business)
- Audit accounts
- Provide information about financial records
- Review the company’s systems and analyse risk
Nonetheless, many clients fear that their CA may disclose their confidential data unintentionally – or worse, intentionally. Other fears also play a part in the client/CA relationship, including protection of IPR rights, maintenance of ownership, liability etc. To prevent issues related to confidentiality, ownership, on time delivery etc., and to protect their own interest, the client must execute a proper document (agreement) with the Chartered Accountant before signing up for his/her services.
But what should be included in this document?
This is the question we mean to answer in this article! So if you are thinking of engaging a CA’s services for yourself or your company, then this article is for you!
Here, we list out some of the major clauses you must insert in your CA agreement to protect your interests and ensure that your relationship with your CA is beneficial and stress-free.
#1: Date and place of execution
The date is very important to confirm the document’s validity under the Limitation Act. Any future legal action, if any, can be initiated only if it is not time-barred. Further, mentioning the place makes it easy to identify where stamp duty (in case of registration) is to be paid.
#2: Details of the Parties
Details such as name, father’s name, address, age should be included. In case of non-individuals like companies, LLPs, partnership firms, etc, details of the entity and the mode of authorisation should also be stated for easy identification.
#3: Scope of work
It is critical to decide on and agree upon the scope of work right in the beginning to ensure that the service under the agreement can be performed and completed within the agreed time period. Furthermore, changes to the scope of work and charges for the same should also be mentioned, in order to prevent any ambiguities at a later stage of the relationship.
#4: Commercials
Charges for the professional service and whether these charges are inclusive of taxes (or not) must also be specified. It is also important to mention the payment cycle i.e. monthly, quarterly, half yearly or yearly, and how the payment will be cleared.
#5: Duration
The deed should specify the duration/term for the agreement. On expiry of the term, the agreement is either terminated or renewed as agreed upon by both parties.
#6: Confidentiality
This is also a crucial clause that must be included in the agreement. All information and documents shared under the service agreement with the CA shall be considered confidential and no disclosure shall be made by him without prior approval of the Client
#7: Ownership of Intellectual Property Rights (IPR)
In case any kind of IP is created out of the work assigned to the CA, details of who will own such IP and IPR should be stated clearly in the agreement.
#8: Document ownership
Who will own the information and documents produced or developed out of the work assigned to the CA by the client? This should be clearly stated in the agreement.
#9: Duties of the CA
These must be stated specifically in the agreement. The CA shall provide these services with due care and diligence, and to an acceptable standard of quality as expected by the client.
- The CA shall abide by all the laws, rules and regulations while discharging the duties with regard to the agreed-upon Scope of Work
- The CA should ensure that he will not disclose the nature or results of his work with the client to any third party
- The CA shall assign the best team to the client’s tasks keeping in mind the requirement and time constraints
- The CA shall be responsible for the timely delivery of all deliverables
#10: Duties of the Service Receiver (client)
The client must also fulfil certain duties, which should also be stated specifically in the agreement. These include:
- Provision of all necessary support and documents to the CA to complete the work within agreed time period
- Timely payment of CA’s charges and fees
#11: Miscellaneous clauses
Other clauses that can be added to the agreement include:
- Relationship: This shall be of Principal (client) to Principal (CA), which means that neither party shall be liable for the wrongful act of the other party.
- Termination: Under what conditions would the agreement be treated as terminated and the timeline for termination
- Assignment: Whether the work given to the CA can be re-assigned or transferred by him to any third party
- Copies of Agreement: To ensure originality and to avoid tampering, the number of original copies signed by the parties can be stated
- Damages and indemnity: In case any damage is incurred by one party due to the fault of the other, then the latter shall indemnify the former
- Jurisdiction: In case of any disputes, the area of jurisdiction where any legal petition can be filed
- Arbitration Clause: If both parties mutually agree to resolve any dispute out of court, this clause will help them resolve the matter through arbitration
CONCLUSION
These are some of the most critical clauses that need to be included in any agreement when entering into any transaction with a CA. Other suitable clauses can also be added subject to mutual discussion between both parties and depending upon the nature of expected future transactions.
So the next time you hire a CA on retainership, do refer to this article!
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