Is CFO Mandatory ?

Is CFO Mandatory ?

The chief financial officer (CFO) is the financial officer of an organization or a company. A CFO is in charge of the finance operations such as financial planning, financial risk management, record-keeping, and reporting on the finances of the company. The CFO is also in charge of data analysis in some sectors.

Some CFOs are also known as CFOOs, which stand for chief financial and operational officers. Most CFOs of major corporations have financial degrees as well as qualifications. These degrees can include a Master of Business Administration (MBA), a Master of Science (in either financial or Accounting), a CFA, or an accounting background, such as a Certified Public Accountant. 

A finance department consists of counselors and accountants that include Certified Public Accountants, Chartered Accountants, Certified Management Accountants, and Chartered Certified Accountants. Their appointment and the hiring procedure are governed by the Companies Act of 2013 because they play such a vital role in a business and a company’s future. Let us review the key points and procedures for appointing a Chief Financial Officer (CFO) explained in detail by ESPECIA. 

Who is a CFO?

A CFO or Chief Financial Officer is a person designated as the Chief Financial Officer of a firm according to the Companies Act of 2013. The Companies Act of 2013 explains the qualification, experience, terms, and criteria for Chief Financial Officer (CFO). The Companies Act of 2013 does not define the job, functions, terms, conditions, and so on that the Chief Financial Officer (CFO) must strictly comply with.

As a result, it is entirely up to the company's management to determine their qualifications, expertise, duties, or functions. Though, it should be noted that it should be strictly stated in the appointment letter provided by the corporation to the appointee Chief Financial Officer (CFO).

Why should you appoint a CFO?

A company's chief financial officer (CFO) is in charge of managing all aspects of financial management, including financial planning, risk management, record-keeping, budgeting, forecasting, and reporting on finances. In several industries, data analysis falls under the purview of the CFO.

Also, take note that the scenario of a digital chief financial officer (CFO) is becoming a common thing in today’s companies as well as organizations. A virtual CFO is an external service provider that provides highly skilled assistance with an organization's financial needs, similar to what a chief financial officer would for other organizations. One individual or an organization can serve as a virtual CFO. 

There is no common definition of the position of a Chief Financial Officer (CFO). Also, various qualifications and qualifying requirements depending on the country are not fixed for the position of a CFO. The following laws govern the appointment of the Chief Financial Officer (CFO): 

  1. The Companies Act of 2013 
  2. The SEBI (Listing Obligations and Disclosure Requirements) Regulations of 2015 is another example.

Every listed business and every other public company with a total paid-up capital of ten crore rupees or higher is required to appoint the chief financial officer (C.F.O.) as the chief managerial officer (KMP), per the Companies Act, 2013, which is in force today. According to interpretation, a Chief Financial Officer (C.F.O.) is not necessary to be appointed if a corporation does not belong inside the aforementioned category or ambit. 

However, a business might voluntarily adhere to this requirement. Keep in mind that a Chief Financial Officer (CFO) who is chosen as key managerial personnel may not hold office in more than one business at the same time, except for its subsidiary company. However, a CFO may be appointed as a director in any other company with the approval of the board of the company where they were originally appointed as the director.

A Chief Financial Officer (CFO) may be appointed for a variety of years. This is entirely up to the management or company. The term as well as any potential termination dates are already stated in the CFO's appointment letter for a particular person.

There are a few forms that are required to appoint a chief financial officer or CFO in a company. These forms are DIR-12 within thirty (30) days as well as MR-1 within sixty (60) days.

Which companies should appoint a CFO?

A Chief Financial Officer (CFO) is regarded as Key Management Personnel under Section 203 of the Companies Act of 2013. In addition, the following organizations must designate a Chief Financial Officer (CFO): 

  1. Each listed business 
  2. Any other publicly traded firm with a paid-up capital stock of at least ten crore rupees.

What is the procedure to appoint a CFO?

Here is the step-wise procedure to appoint a CFO for a company or business: 

  1. The first step is to prepare the board meeting notice and any draught resolutions that will be adopted at the meeting to consider candidates for the position of Chief Financial Officer (CFO).
  2. Make sure that the notice and the agenda for the board meeting are sent to all company directors.
  3. Call a board meeting to adopt the next board resolution.
  4. The board's decision must be sent to the stock exchange where the company's securities are listed within 30 minutes after the meeting's conclusion.
  5. Send the nominee a letter of appointment designating them as the new Chief Financial Officer (CFO).
  6. Within thirty (30) days of being appointed as Chief Financial Officer (CFO), file e-Form DIR-12 with documents with the Registrar of Companies concerning the appointment of director and concurrently as a Chief Financial Officer (CFO).
  7. Send the letter of appointment to the Chief Financial Officer (CFO) as well as registration in the business register, minute books, etc.

Documents required to appoint a CFO

The following documents are required for an appointment of a chief financial officer in a company:

  • Appointment letter
  • Consent letter of proposed Chief Financial Officer (CFO)
  • Copy of Board Resolution for Board Meeting
  • Intimation letter for stock exchange
  • Any other document as is required 

What happens when a CFO resigns from an organization or company? 

There are numerous occasions or reasons when a Chief Financial Officer (CFO) wishes to resign from the organization for whatever cause. When a Chief Financial Officer (CFO) resigns, she or he may do so at any moment after giving notice and providing a reason. The firm will take the necessary efforts to accommodate such a resignation of the CFO. It should be kept in mind that the resultant vacancy for a CFO must be filled by the Board at a Board meeting within six months of the occurrence of such vacancy.

Each director and key managerial employee of the company who is in standard will be responsible for a fine of 50,000 rupees, and any company that fails to employ a Chief Financial Officer (CFO) will be subject to a penalty of 5 lakh rupees. If the default is still occurring there will be an additional fine of 1,000 rupees for each additional day that the default lasts but does not exceed five lakh rupees.


The chief financial officer (CFO) is the highest-ranking financial expert in an organization. CFO is in charge of the company's financial well-being. Building a top-notch accounting and finance team is one of the CFO's duties. Other duties of a CFO include maintaining revenue and expense balance, managing FP&A (financial planning & analysis) activities, recommending mergers and acquisitions, securing funding, collaborating with department heads to analyze financial data and create budgets, attesting to the veracity of reports, and providing advice to boards of directors as well as the CEO on strategy.

The top financial authority in an organization is held by the chief financial officers. They are in charge of managing the organization's financial position as well as advising the CEO and council on strategic direction, based on the operational and financial information and reports delivered by the accounting and finance teams. Therefore, a CFO plays an important role in an organization or company. 


1. What is the place of the CFO in a company?

The role of Chief Financial Officer is recognized for an initial time under the Companies Act of 2013. He is the individual who holds the post of CFO and is in charge of managing the company's financial activity. He was recently included in the Officer in Default list due to his work in the organization.

A CFO does not have to be the company's director. Nonetheless, he has been designated as a Key Managerial Personnel (KMP). A CFO cannot serve as CFO in multiple businesses at the same time unless it is a subsidiary. He may, however, serve as a director in another firm with the Board's authorization.

2. What are the main responsibilities of a CFO in a company?

The primary responsibilities of a CFO in an organization are given below: 

  • Supervising the company's financial activities.
  • Whether or not he is a KMP, he must sign the company's financial statements.
  • Financial statements must be presented truthfully and fairly.
  • Keeping and monitoring the company's day-to-day financial operations.

3. Who is a CFO?

CFO is an executive in charge of the organization's finances. A senior executive is also known as the Chief Financial Officer (CFO). CFO is principally in order of the company's financial management. He is responsible for the company's financial performance optimization, both internal and outside financial reporting, cash flow monitoring, financial planning, etc. The Companies Act of 2013 established the CFO idea for the first time. The Companies Act of 1956 did not contain such a concept of a CFO in an organization.

4. Is it necessary to appoint a CFO to a company?

A chief financial officer and a company secretary must be appointed as key managerial personnel (KMP) in addition to the chief executive officer or managing director for every listed company as well as every other public company with a paid-up capital stock of ten crore rupees or more, according to the Companies Act of 2013.

5. Who is required to fulfil the role of CFO?

A bachelor's, as well as a master's degree, is required for the specialized position of CFO. You'll also probably need to complete a couple of financial certifications and accumulate some financial experience. It should be emphasized that the Board must fill the resulting vacancy at an assembly of the Board within six months of the date of the vacancy.

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