All About The Chief Financial Officer

Introduction

In today’s evolving company requirements and technological developments, the Chief Financial Officer (CFO) job has evolved tremendously. The CFO’s initial responsibilities mostly consisted of financial reporting and compliance, with little involvement in strategic choice-making. But, in the twenty-first century, the function has grown to encompass risk assessment, financial management, strategic planning, and decision-making. In this article, we will learn all about the position of CFO in a company.

Who is a CFO?

CFO stands for Chief Financial Officer, who is a senior executive responsible for managing the financial operations of a company. The CFO’s primary role is to ensure that a company’s financial performance is optimized, financial risks are managed effectively, and financial decisions are aligned with the company’s strategic goals.

CFO under The Companies Act 2013

• As per Section 2(19) “Chief Financial Officer”  means a person appointed as the chief financial officer of a company.
• Section 203 of the Companies Act, 2013 talks about the need to have full-time Key Management Personnel, which includes a full-time Chief Financial Officer.

The following companies are required to appoint a CFO:

1. Every listed company;

2. Every other public company with a paid-up share capital of Rs. 10 Crore or more.

3. Other than the above mentioned companies any other company which wishes to appoint CFO can do so by complying with the requirements as may be prescribed under The Companies Act 2013.

Who can appoint a CFO to a company?

A CFO may be appointed either by the Board of Directors or by the Managing Director of the Company.

What is the procedure for the appointment of a CFO?

A company’s Chief Financial Officer (CFO) is normally appointed through a multi-step procedure.

1. First, a draft resolution or resolutions to be passed in the meeting for candidate consideration for appointment as CFO to be produced together with a notice of the board meeting. All of the company’s directors are then provided a copy of this notice atleast  prior to 7 days of the Board meeting .
2. A board meeting is then called to approve the appointment of the chosen candidate as CFO. The decision of the board meeting must be communicated to the stock exchange within 30 minutes of the meeting’s conclusion if the company’s securities are listed on a stock exchange.
3. A letter of appointment is given to the CFO after their selection. Within 30 days of the CFO’s appointment, the firm must submit an e-Form DIR-12 with all necessary attachments to the Registrar of Companies detailing the appointment of the director and CFO.

What is the tenure of a CFO?

A Chief Financial Officer (C.F.O.) may be appointed for any number of years; this is entirely up to the management.

Roles and responsibilities of CFO

The CFO is an important part of the company’s management team and is responsible for ensuring the financial well-being of the company. Some of the key roles and responsibilities of the CFO under the Companies Act, 2013 are:

• Financial Reporting: The CFO is in charge of preparing the company’s financial statements and making sure they adhere to all applicable accounting standards and legal obligations.

• Compliance: The CFO is in charge of assuring adherence to a number of legal requirements, including the Income Tax Act, the Securities and Exchange Board of India (SEBI) regulations, and the Companies Act, 2013, among others.

• Risk management: The CFO is in charge of detecting and controlling the company’s numerous financial risks. This entails detecting potential hazards, evaluating their impact, and coming up with mitigation methods.

• Budgeting and Forecasting: The CFO is in charge of creating the company’s annual budget and making financial projections. This aids management in making better decisions.

• Treasury Management: The CFO is in charge of overseeing the cash flow of the business and making sure that there is enough liquidity to satisfy its obligations.

• Capital Raising: The CFO is in charge of finding new sources of funding for the business, including debt, equity, and other instruments.

• Investor Relations: CFOs in India may also be involved in overseeing interactions with analysts and investors. This may entail expressing the company’s financial success, offering predictions of future profits, and responding to inquiries regarding the company’s financial operations and strategy.

• Sustainability: As businesses place more emphasis on sustainability, CFOs in India may be responsible for creating and putting into action sustainability initiatives that complement the business’s financial goals. This may entail overseeing investments in renewable energy and other environmentally friendly technology, reporting on the business’s social and environmental impacts, and making sure environmental laws are followed.

• Maintaining cash flow: As a CFO in India, maintaining cash flow is a critical responsibility that requires careful attention to financial management and planning. Cash flow is the lifeblood of any business, and a CFO’s primary responsibility is to ensure that there is enough cash on hand to meet the company’s obligations, including paying suppliers, employees, and lenders.

The role has been further impacted by the development of digital technologies, which have brought more attention to data analysis, cybersecurity, and data privacy. The CFO is now involved in ESG reporting and compliance because of the growing significance of environmental, social, and governance (ESG) factors. The CFO function will probably keep changing and adapting as new trends and problems continue to impact the company landscape. Effective management of the CFO job in contemporary firms requires an understanding of both historical context and emerging trends.