ICAI Extends Time Limit for Transfer of Goodwill of Deceased CA Proprietor Firms from One Year to Three Years
The Institute of Chartered Accountants of India (ICAI), through its Ethical Standards Board (ESB), has introduced a significant and compassionate reform by extending the time limit for the transfer of the goodwill of a proprietary firm of a deceased Chartered Accountant from one year to three years from the date of death of the member.
The amendment has been approved by the ICAI Council and shall apply to the relevant provisions of the Code of Ethics, 2026 (Volume I). The decision recognises the practical difficulties faced by the families of deceased practitioners and provides them with a realistic timeframe to complete the transfer of professional goodwill while ensuring continued compliance with ICAI’s ethical framework.
What Has Changed?
Prior to this amendment, the goodwill of the proprietary firm of a deceased Chartered Accountant was required to be transferred within one year from the date of death.
Following the approval of the ICAI Council:
- The permissible period for transfer has been extended from one year to three years.
- Wherever the Code of Ethics, 2026 (Volume I), prescribes a one-year period for such transfer, it shall now be read as three years.
It is important to appreciate that this amendment changes only the timeline. The substantive eligibility conditions, procedural requirements and ethical obligations governing the transfer of goodwill remain completely unchanged.
Why Was the Amendment Necessary?
The earlier period of one year often proved insufficient for legal heirs to complete the succession process and finalise the transfer of a professional practice.
In many cases, the family has to first cope with the personal loss before dealing with legal and professional formalities. Matters such as probate proceedings, succession certificates, disputes among legal heirs, valuation of the practice, identification of an eligible Chartered Accountant purchaser and negotiation of commercial terms frequently consume considerable time.
Recognising these practical realities, ICAI has provided a more reasonable period of three years so that the goodwill of an established professional practice is not lost merely because procedural formalities could not be completed within a year.
Practical Significance of the Amendment
The revised timeline is expected to provide substantial relief by:
- allowing legal heirs adequate time to complete succession-related legal formalities;
- enabling proper valuation of the professional practice and its goodwill;
- facilitating identification of a suitable purchasing Chartered Accountant;
- permitting meaningful negotiations and completion of documentation;
- reducing the possibility of distress sales under time pressure; and
- preserving the commercial value of established professional practices.
The amendment also provides prospective purchasers with sufficient time to conduct due diligence and negotiate fair commercial terms before acquiring the goodwill.
Transfer Permitted Only to a Practising Chartered Accountant
The goodwill of the proprietary concern of a deceased Chartered Accountant can be transferred only to a member holding a valid Certificate of Practice (COP).
The intending purchaser is required to submit a formal application to ICAI seeking approval for the transfer.
The extension of time from one year to three years does not alter this eligibility requirement.
Time Limit for Application
Pursuant to the latest decision of the ICAI Council, the application for transfer of goodwill may now be made within three years from the date of death of the member instead of the earlier period of one year.
This is the only substantive modification introduced by the recent amendment.
Documents Required for ICAI Approval
The application submitted to ICAI should ordinarily be accompanied by appropriate supporting documents, including:
- Death Certificate of the deceased Chartered Accountant;
- Draft Sale Deed or Goodwill Transfer Agreement executed between the legal heir(s) and the purchasing Chartered Accountant; and
- such declarations, confirmations and supporting documents as may be required by ICAI.
Public Notice Before Approval
Before ICAI grants approval, the intending purchaser is required to publish a public notice announcing the proposed purchase of the goodwill of the proprietary concern.
The notice should invite objections, if any, from interested persons.
Any objection is required to be submitted directly to the concerned Decentralised Office (DCO) of ICAI, and a copy of the published advertisement is also required to be furnished to the concerned DCO.
This process enhances transparency and safeguards against unauthorised transfers.
Examination by ICAI
Before recognising the transfer, ICAI examines several important aspects, including:
- the genuineness of the proposed transaction;
- whether the persons executing the transfer are the lawful legal heirs;
- whether the purchaser fulfils the eligibility requirements under the Chartered Accountants Act and Regulations; and
- whether any objection has been received pursuant to the public notice.
Only after satisfactory examination does ICAI recognise the transfer of goodwill.
What Does the Transfer of Goodwill Include?
The approval granted by ICAI relates only to the professional goodwill of the proprietary practice and the right to use the proprietary firm’s name, subject to ICAI’s approval.
However, such approval does not automatically transfer:
- client engagements;
- audit appointments;
- statutory auditor positions;
- powers of attorney;
- contractual rights; or
- professional assignments.
Each engagement must independently comply with the applicable law, client consent requirements and the Code of Ethics.
Continuing Ethical Responsibilities
The purchasing Chartered Accountant remains fully bound by the ethical requirements prescribed under the Chartered Accountants Act, 1949, the Chartered Accountants Regulations and the ICAI Code of Ethics.
Among other things, the purchaser must:
- maintain professional independence wherever applicable;
- avoid misleading representations regarding acquisition of the practice;
- comply with the provisions governing firm names, publicity and professional conduct; and
- ensure continued adherence to all professional and ethical standards.
Transition Framework
While ICAI approval is an essential requirement, a legally secure transfer demands considerably more than mere compliance with the Code of Ethics. Proper legal documentation and a carefully planned transition substantially reduce the possibility of future disputes and ensure continuity of the professional practice.
1. Execute a Comprehensive Goodwill Transfer Deed
A professionally drafted Goodwill Transfer Deed should preferably be executed and, wherever legally advisable, registered.
The deed should comprehensively cover:
- particulars of the deceased Chartered Accountant;
- details of all legal heirs;
- authority of the executants;
- description of the proprietary concern;
- purchase consideration and payment terms;
- effective date of transfer;
- right to use the proprietary name, subject to ICAI approval;
- transfer of telephone numbers, website, domain names, professional email IDs, logos, stationery and branding;
- assignment of intellectual property rights and practice records to the extent legally permissible;
- delivery of books, records and client files after obtaining necessary client consent;
- indemnity by legal heirs regarding title to the goodwill; and
- indemnity by the purchaser regarding future professional liabilities.
A well-drafted deed serves as the foundation of a legally secure transaction.
2. Establish Legal Heirship Beyond Doubt
The purchaser should independently satisfy himself that the persons executing the transfer possess lawful authority.
Depending upon the circumstances, appropriate documentation may include:
- Death Certificate;
- Legal Heir Certificate;
- Family Member Certificate;
- Succession Certificate, where necessary;
- Probate of Will;
- Letters of Administration;
- Registered Will; and
- No Objection Certificates (NOCs) from other legal heirs where one heir executes the transfer.
Although a Succession Certificate may not always be mandatory for goodwill itself, clear evidence of succession considerably reduces the possibility of future disputes.
3. Complete ICAI Formalities Before Using the Goodwill
The purchaser should complete all procedural requirements prescribed by ICAI, including:
- filing the prescribed application;
- publication of public notice;
- submission of the transfer agreement;
- waiting for expiry of the objection period; and
- obtaining formal approval from ICAI.
Only after completion of these formalities should the purchaser commence use of the transferred goodwill.
4. Prepare a Structured Client Transition Plan
Professional goodwill ultimately rests upon client confidence rather than merely the firm’s name.
A structured client transition should therefore include formal communication informing clients about:
- the demise of the proprietor;
- appointment of the successor;
- uninterrupted continuation of professional services;
- continued confidentiality; and
- revised contact details of the successor.
Such communication helps preserve long-standing professional relationships.
5. Obtain Fresh Engagement Letters
Professional assignments are generally personal contracts and do not automatically pass with goodwill.
Accordingly:
- existing engagements should be reviewed;
- fresh engagement letters should be executed wherever required;
- audit appointments should comply with the Companies Act, Income-tax Act, GST laws and other applicable statutes; and
- regulatory filings requiring appointment of a Chartered Accountant should be suitably updated.
6. Obtain Client Consent Before Transfer of Records
Client files contain confidential information protected under the Code of Ethics.
Accordingly:
- client consent should be obtained wherever confidential records or working papers are proposed to be transferred;
- confidentiality should be preserved throughout the transition; and
- statutory records should continue to be maintained in accordance with ICAI Standards on Quality Management (SQM), Standards on Auditing and other applicable laws.
7. Transfer of Digital Assets
Modern professional practices derive substantial value from digital infrastructure.
The transfer documentation should specifically address:
- domain names;
- professional email IDs;
- website ownership;
- cloud storage;
- digital signatures;
- practice management software;
- GST Suvidha credentials;
- Income-tax portal authorisations;
- MCA portal credentials; and
- professionally used social media accounts.
Passwords and digital access credentials should be changed immediately upon completion of the transfer.
8. Regulatory and Banking Changes
The successor should also complete consequential regulatory changes, including:
- bank mandates;
- GST registrations, wherever applicable;
- Professional Tax registrations;
- UDYAM/MSME registrations;
- vendor registrations;
- office lease documentation;
- insurance policies; and
- employee records and payroll documentation.
9. Employee Transition
Employees often constitute an integral part of a successful professional practice.
The transition plan should therefore address:
- continuity of employment;
- issuance of fresh employment letters wherever necessary;
- confidentiality obligations; and
- continuity of gratuity, provident fund and other statutory compliances.
10. Proper Valuation of Goodwill
The purchase consideration should ideally be supported by an objective valuation based upon relevant commercial parameters such as:
- recurring professional receipts;
- quality and stability of clientele;
- profitability;
- age and reputation of the practice;
- staff strength;
- geographical standing;
- growth prospects; and
- existing retainerships.
Scientific valuation minimises future tax and legal controversies.
11. Tax and Accounting Considerations
Before completing the transaction, both parties should obtain appropriate professional advice regarding:
- taxability of the consideration received by the legal heirs;
- deductibility or capitalisation of the acquisition cost in the hands of the purchaser;
- GST implications, if any;
- stamp duty under the applicable State laws; and
- accounting treatment of acquired goodwill.
Proper tax planning and documentation at the outset can prevent avoidable litigation at a later stage.
Conclusion
The ICAI’s decision to extend the time limit for transfer of the goodwill of a deceased Chartered Accountant’s proprietary firm from one year to three years is a timely and progressive reform. It reflects a practical appreciation of the legal, emotional and commercial challenges faced by bereaved families while preserving the professional value built over years of dedicated practice.
However, the amendment should not be viewed merely as an extension of time. Since every other procedural and ethical requirement remains intact, legal heirs and prospective purchasers must continue to ensure strict compliance with the ICAI Code of Ethics, the Chartered Accountants Act and all applicable legal requirements.
A carefully structured transaction—supported by proper legal documentation, clear evidence of succession, objective valuation, ICAI approval and a well-planned client transition—will not only safeguard the interests of both parties but also ensure continuity of professional services while upholding the dignity and ethical standards of the Chartered Accountancy profession.
