Friday, 29 June 2018

Legal Responsibility of Interim CFO

Let’s understand first what is meant by Interim CFO? Interim CFO as the name itself suggests is an interim arrangement made in order to fill any gap which has occurred and there is an urgency to fill the gap for the smooth function of the company.

In this situation company hires a person competent enough to handle and work as CFO of the company is hired by the company. This way company can achieve success to an extend in smooth functioning of the company. 

Now the question comes about the legal responsibility of the interim CFO during his stay in the company. The status of Interim CFO being of temporary in nature, gives rise to different questions like weather he shall be enjoying all the rights of permanent employees? Weather he is can be held liable for the wrong actions of the previous employee acts or acting in furtherance of the acts/decisions of the previous employee?

The rights of Interim CFO

The rights of Interim CFO should be nothing less the rights enjoyed by the previous permanent employee, otherwise, the Interim CFO will not enjoy the same powers as the previous one. The reporting employees to him may not take his directions and orders in the same spirit as it is ought 
to be have taken.   

However, in practice, it depends upon the agreement executed between the Employer and the employee.
Apart from basic information, the agreement should specifically state the rights, powers to enforce his directions, who all are reporting to him.

According to section 203 of the Companies Act 2013. CFO comes in the category of KMP and thereby all the section applicable to the KMP pursuant to the relevant section under the Act are applicable to Interim CFO also. However, it is to be noted that the interim CFO cannot be held liable for the acts and decisions are taken by previous CFO and such other matters directly or indirectly incidental to the previous act. The Interim CFO can only be held liable for the acts which he has done in an individual capacity. The Interim CFO shall all the responsibilities of the CFO which is applicable to A CFO as pursuant to a relevant section of Companies Act 2013.


What are all things included in CFO services?
  1. Accounting System Selection and Integration
  2. Decision-making Indicators (Scorecards and Metrics)
  3. Cash Flow Optimization
  4. Accounting Best Practices
  5. Financial Systems Improvement
  6. GAAP, SEC, FAS and Financial Reporting
  7. Financial Restructuring and Investment Strategies
  8. IPO / Exit Preparation

Why have an Interim CFO?
  • To continue smooth functioning of Finance department.
  • It is crucial to have someone on the team who is able to manage company’s finances and keep financial house in order.
  • Hiring a full-time CFO is a time-consuming process and can easily take several months.
  • Companies undergoing special projects such as merger amalgamation, acquisition can not afford to not have in-house interim CFO in absence of permanent CFO.
  • An interim CFO can cater to the business needs of hiring company’s needs and get all the know-how without the added costs
  • The interim CFO will be able to bring in a fresh perspective on the business from prior projects and experiences and put the company on a path to success with less effort than an internally grown candidate.
  • Will keep the company competitive.

Hence with the benefits of hiring an interim CFO, the company should at the same time be prepared for arranging an environment wherein the virtual CFO rights are well recognized and protected at the same time be loudly announced in the company so that job allotted can be executed smoothly and without any ambiguity.

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