This helpsheet has been issued by ICAEW’s Technical Advisory Service to help ICAEW members consider the practical implications on accepting an appointment as a sole principals alternate.

Members may also wish to refer to the following guidance:

• Arrangements for alternates – guidance for a sole principal
• Your guide to maintaining your firm’s record
• Coping with the incapacity or sudden death of a sole practitioner

Accepting an appointment as an alternate is a serious decision and it is important to consider the following.

• Skill set: re you familiar with the type of work and the client base of the sole principal’s practice? Do you have the appropriate professional skills (e.g. anti-money laundering, regulations, management of staff etc)? Does the practice provide regulated activities such as audit, investment business, insolvency and probate? Do you hold the necessary licenses/registrations required to carry out this work, if necessary?
• Capacity: do you have spare capacity, should the time come, to take on extra work? Would you prefer to manage the transition of clients to another practice, rather than taking on the work yourself?
• Conflicts of interest: are there any conflicts of interest that would prevent or limit you from acting? If so, you may need to manage the transition of clients to another firm.
• Practicalities: will you have access to files physically/electronically? Will you have access to the office and/or client money account? Has cloud access been arranged for access to information? Will accepting an appointment impact your current PII policy to cover your work as alternate? Will the bank recognise your authority as alternate?

Whilst an agreement can take any form, and could be a verbal agreement, it is good practice to have a legally binding written agreement and, if necessary, seek legal advice. One advantage of a written agreement is that in the event of the death or incapacity of the sole practitioner, the alternate will be able to demonstrate that they are acting with proper authority.

For guidance on what an agreement should contain please refer to Arrangement for alternates – guidance for sole practitioners.

Note that where reserved activities are involved, more than one alternate could be appointed to carry out the practice functions, but any licences that the alternates hold are not transferrable and an application would need to be made to ICAEW for the reserved activity to be carried out by the alternate for the practice.

As soon as you have assumed responsibilities for the conduct of the sole principal’s practice (whether because of the sole principal’s incapacity or death) you must do the following.

• Notify ICAEW. Your guide to maintaining your firm’s record.
• Although you do not need an ICAEW practicing certificate to act as an alternate, if you begin to act as a principal in a firm, you would be required to have one, therefore, if, at that point, you do not have an ICAEW practising certificate or it has lapsed, you must immediately apply for an ICAEW practising certificate. If you are also a member of another professional body you would also need to discuss any practising requirements with them.
• If there are any reserved activities for which you do not hold the appropriate licence, you would need to either, apply for the required licence, arrange for an appropriately licensed individual to join the practice to continue these engagements or, alternatively, disengage from those clients, following the usual disengagement process. 
  As discussed above, licences do not transfer between different accountancy practices, and therefore, an application would need to be made to ICAEW for the alternate to provide licenced activities on behalf of the practice.
• Check the PII’s policy renewal date and secure the continuance of the sole principal’s PII policy during any period of incapacity. In the event of the sole principal’s death, you must discuss the matter with their next of kin and check the sole principal’s PII to ensure that the policy will cover your conduct of the practice. You should also consider discussing arranging run-off cover with the next of kin. We would also recommend you inform your own insurance provider that you are acting as an alternate.
• Write to the list of current clients of the sole principal introducing yourself and advising them of the incapacity or death of the sole principal. In the case of insolvency engagements this may involve notifying creditors and for probate engagements, advising the executor and principal beneficiaries.

If any client advises that they do not wish you to deal with their affairs, then you must comply with their wishes and instructions.

During the period of incapacity or following the sole principal’s death, subject to you holding the necessary regulatory licenses and registrations, you will either be responsible for ensuing a smooth transition of clients to another firm or for carrying on the practice yourself. If carrying on the practice, this must be done in a proper and professional manner and you must take all responsible steps to preserve the goodwill of the business, including the following:

• The sole principal’s practice must be continued under its existing name and title. All business letters or other communications issued by the alternate must bear in a prominent position the following wording:

The practice of [name of sole principal] who [has died / is temporarily incapacitated] is temporarily being carried on by [name of alternate].

• Determine as soon as possible for each client the nature of the engagement, its extent and appropriate deadlines relevant to each client. If any errors or defaults of the sole principal comes to your attention, try to correct the errors and notify the professional indemnity insurer.
• If the practice has audit clients a plan will need to be made for each client. Where the alternate is an RI in their own practice, this could involve the current audit firm resigning, and then the RI’s own practice being appointed to “take over” the audit. Alternatively, the alternate could apply for RI status in this firm, but it should be noted that there are no provisions in the ISAs for an alternate stepping in. The RI would need to take responsibility for the audit work as a whole under a new engagement. Where the alternate is not an RI, their role is more likely to be focused on making the transition to a new audit firm as smooth as possible.
• Keep all the records of the practice up to date. In additional you must maintain records of expenses incurred in conducting the practice and the remuneration due to you as the alternate. Guidance on fees can be found in the ICAEW Code of Ethics.
• If you encounter a conflict of interest between the interests of your own clients and those of the sole principal’s clients, you should act in accordance with ICAEW Code of Ethics on conflict of interest. You could refer to ICAEW guidance: Identifying and managing conflicts, or alternatively, you could contact the Technical Advisory Services on +44 (0)1908 248250 for further support.

If, while you are conducting the practice of the sole principal, the sole principal’s next of kin agree/want to sell the practice to another party, you should take all reasonable steps to facilitate the transfer in accordance with its terms.

If the sole principal is incapacitated in such a way that consent to such is unlikely ever to be obtained and the incapacity seems likely to continue, you should seek independent legal advice.

If you are an audit alternate or other alternate your authority will stem from the agreement between you and the sole principal. For alternates who are special executors, authority will be granted by the wilI and therefore, in theory, you can act immediately following the death. In practice, it may be difficult to operate the business effectively before probate is granted, because the grant confirms the executors’ authority to third parties such as the practice’s bank. It may be possible for the special executor to apply for a ‘limited grant’ covering only the practice (the normal grant of probate would cover all of the estate of the deceased).

Once you take over the practice you must open new books of account. This would also be required if the sole principal dies when the alternate is already conducting the business under an LPA. These new books of account must be maintained until the practice is disposed of or until your responsibilities come to an end.

New temporary bank accounts including a client bank account, if appropriate, would need to be opened at the practice’s bank. All receipts and payments of the practice must be made through these accounts pending the grant of probate. On such grant, the temporary accounts must be consolidated with the existing accounts of the practice.

It may be sensible to contact HMRC and Companies House, particularly if the sole principal died close to filing deadlines. They may be sympathetic in giving extended filing deadlines.

ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.