Lots In A Name For Coopers & Lybrand India

Auditing giants Price Waterhouse and Coopers & Lybrand decided to merge yesterday to form a mammoth $13 billion global combine. Today, no one in Price Waterhouse or Coopers & Lybrand in India wants to talk about it at least not officially. Dont ask, says a middle-level executive at competitor firm Arthur Andersen when questioned about the issues at hand: Its enough to give one a headache.

Its the Indian laws on auditing that are giving everyone a headache. Minor questions have become major issues, with questions being raised about the name the combine will take in India; the size of the new entity; the name of the new chief executive or managing partner, if there is one.

 

Lets take the name first. Internationally, that question is yet to be answered, but really, it wouldnt matter all that much. In India, the name of the new entity could be a matter of life and death. Theres one thing for sure: whatever the name of the merged entity abroad, in India it cant be Coopers & Lybrand if it wants to stay in the accounting business. In fact, it has to be something on the lines of Price Waterhouse or Price Waterhouse and Company or variations on that.

That is because back in the 1980s, the Institute of Chartered Accountants helped pass a law that effectively prevented foreign firms from practising auditing in India. A firm of auditors can set up shop only if they are named after an existing partner. Thus a partnership firm ( auditing firms also have to all be partnerships with unlimited liability) cannot call itself Macintosh and associates unless there is a Mr Macintosh who works in that company, is a qualified chartered accountant and a partner.

So, effectively, a firm such as Coopers & Lybrand cannot function as auditors in India because there are no locally registered and practising chartered accountant partners by the name of Mr Coopers and Mr Lybrand who work as partners in the multinational. There are several Guptas, Khuranas and Lohias, but no Coopers and no Lybrand. If there were, it may be taken as a safe bet that Coopers & Lybrand would have snapped them up. On the other hand, firms such as Price Waterhouse and Arthur Andersen have gotten around that rule because they were in India before it came into effect.

One solution to that problem, you may say, is to get a Mr Coopers and a Mr Lybrand from abroad, say the United Kingdom and induct them as partners here. But that will not work. For, the institute also does not recognise a CA degree from abroad. Another method could be to ask existing partners to change their names and rechristen themselves, But in the 50th year of Indian independence that would be a bit much. A frivolous solution is what Kaushik Dutta, partner at Lovelock and Lewis, calls it.

That brings us to the third player in the drama, Lovelock and Lewis. This is the Indian auditing company (set up in the 19th century) that Coopers and Lybrand has so far used to sidestep the archaic Indian laws.

While Coopers and Lybrand limits itself to all kinds of consultancy work, its auditing contracts are channelled to Lovelock and Lewis, a member firm in accounting legalese. So now what happens to Lovelock and Lewis, when Coopers and Lybrand has Price Waterhouse to channel its business to?

Lovelorn ? asks a partner at Ernst and Young in Mumbai. Very frivolously, one must admit. For, it is a sore point. Lovelock and Lewis and Coopers go back almost two decades. Also, Coopers has invested a considerable amount of time, money and manpower in Lovelock. It would appear now, in India at least, that Lovelock too may have to merge with the two giants, thus making it a troika of sorts.

But that could cause even more headaches, again because of those laws. One problem is: exactly who is going to merge with whom? For, in India, there is not one Price Waterhouse, there are two. And there is not one Lovelock and Lewis, there are three.

Indian law puts a limit on the number of partners a firm can have, 20 at the moment. This limitation exists almost nowhere else in the world. So Price Waterhouse, or Batliboi, or Lovelock can have only 20 partners at a time. To get around that provision auditing companies, Indian and foreign, have set up two or three companies all of which have partners at 20 or below. In this way the firm obeys the law and gets as much business as it can.

But now that there is a merger on, which company is going to merge with which one? Or are they all going to continue operating independently ?