If the time’s come for you to realise the equity that you’ve invested into your business you’ll need a plan – whether you’re selling your entire practice or only your client list. That way you can optimise the value of your business and minimise the stress on you, your staff and your clients.

Before you get started

Firstly, take time to think through how you intend to sell your practice.

• What are you selling – only your client list or your entire practice?
• When are you planning to sell?
• Has your client list or practice been independently valued?
• Will you engage a business broker or sell on the open market?
• Do you want to take on a temporary consulting role with the new practice to help transition clients or do you want to exit completely?

A checklist for your commercial lawyer

Regardless of the why, when, and how behind your decision to step away from your practice, there is one certainty when selling a business: You’ll need the help of a good commercial lawyer.

Your commercial lawyer will draft the sales contract and work to minimise your risks. Talk to your lawyer about what you want from the sale process, using this checklist to help you:

Specific assets to be sold	Transfer of website and email addresses
Staff retention in the new business	Transfer of client files/records
Your involvement in the new business and remuneration terms	Payment terms including interest on late payments, retention or claw back provisions
Existing liabilities, such as leases and employee entitlements	Exclusions
Existing debtors including client work in progress	Restrictive covenants
Goodwill valuation	Post-sale conditions, dispute management/arbitration clauses
Trademarks and business names	Confidentiality clauses

Sometimes a portion of the purchase funds will be held in escrow to protect the buyer if clients don’t transition to the new business or there’s inaccurate or incomplete information. This is typically included in the sales contract, along with an arbitration clause to help settle any claims against funds in escrow.

Protecting client privacy

Potential buyers of your business will want to know about your clients as part of their due diligence process. That way they can assess your business’s value and the risks that could arise in the future. Typically, they’ll want to review a sample of your client files and workpapers. If records are messy or incomplete, lodgements are behind or there’s evidence of poor professional advice in the past, the buyer is alerted.

However, you have professional, legal and ethical obligations to keep your clients’ information confidential and private. These are:

Australia

• APES 110 Code of Ethics for Professional Accountants – Subsection 114 confidentiality.
• Tax Practitioners Board’s Code of Professional Conduct – Code item 6 on confidentiality.
• Privacy Act 1988 and Australia Privacy Principles (APP’s).

New Zealand

• NZICA Code of Ethics – Subsection 114 confidentiality 
• Privacy Act 2020 and information provided by the Privacy Commissioner. 

How your client engagement letter can help

You can prepare ahead by putting a general authority in place between your practice and your clients that permits you to disclose information to potential purchasers. You can incorporate this authority into your engagement letter.  The CA ANZ engagement letter tool includes a confidentiality/disclosure clause you can tailor to your practice and situation. 

Typically, a seller will provide anonymised client information to an interested buyer. This can be a list of clients with details of fees, category of work (such as tax, consulting, audit or financial planning), client industry, age and location but with the client’s name removed. Normally, a general authority in your engagement letter allows this disclosure. However, you should always be careful when disclosing information about a client even if you don’t name them. This is because the information itself may identify the client.

Typically, a seller will provide anonymised client information to an interested buyer.

That’s why it’s important to always get advice from your lawyer if you’re unsure. And if you’re providing more specific information about a client to a buyer, first get specific consent from the clients concerned.

Have potential buyer sign confidentiality agreement 

What’s more, the potential buyer is usually required to sign a confidentiality agreement before they view this information.

5 things to do after you sell your practice

Once you’ve found a buyer and signed the contract, there are five actions you’ll need to take to implement the agreement.  

1. Write to your clients to tell them you’ve sold your practice and that you’re planning for the new owner to take over their work. Explain they have the right to find another accountant if they wish.
2. Phone your larger and longer standing clients to reassure them.
3. Talk to your staff about the changes and their options.
4. Transfer assets such as leases and trademarks to the new owner.
5. Advise CA ANZ. If you won’t be continuing in public practice, you should consider cancelling your Certificate of Public Practice.

Members in Australia, will also need to: 

1. ensure you have Professional Indemnity insurance (PI) run-off cover in place for your work for your former clients. PI claims can arise up to seven years after the act or omission occurred. If you don’t have run-off PI, you’re not only putting your own personal assets at risk but you’re also breaching your member obligations under CA ANZ Regulation CR2A Professional Indemnity Insurance and the CA ANZ Professional Standards Scheme. 
2. contact the Tax Practitioners Board (TPB) if you’re a registered tax agent about transferring your clients across to the new tax agent and refer to the TPB’s guidance.

Members in New Zealand should also consider obtaining run-off PI cover so that they do not put their own assets at risk.  

Further reading for Australian members 

• Tax Practitioners Board – Code of Professional Conduct – Confidentiality of client information 
• Australian Privacy Principles 
• CA ANZ Regulation CR2A Professional Indemnity Insurance