Extended 3-Year Window for Transfer of Goodwill of Deceased CA Proprietor Firms – Practical & Legal Guide

The Institute of Chartered Accountants of India, acting through its Ethical Standards Board (ESB), has approved a key amendment to the Code of Ethics, 2026 (Volume I) concerning proprietary firms of deceased Chartered Accountants. The permissible period for transfer of goodwill of such proprietary concerns has now been enhanced from one year to three years from the date of death of the member.

This change, endorsed by the ICAI Council, is aimed at easing the challenges faced by legal heirs in managing succession to a professional practice, without compromising on the professional and ethical safeguards laid down under the Chartered Accountants regulatory framework.

Core Change Introduced by ICAI

Earlier position vs. new position

Under the earlier ethical regime:

  • The goodwill of the proprietary firm of a deceased Chartered Accountant had to be transferred within one year from the date of his/her death.
  • Several clauses in the Code of Ethics, 2026 (Volume I) explicitly reflected this one-year cap.

Following the latest Council approval:

  • The outer limit for transferring such goodwill stands extended to three years from the date of demise.
  • Everywhere in the Code of Ethics, 2026 (Volume I) where a period of “one year” was earlier stipulated for transfer of goodwill of the proprietary firm of a deceased Chartered Accountant, it must now be construed as “three years”.

Important:
Only the time period has been modified.
All substantive conditions, eligibility norms, procedural steps and ethical obligations connected with such goodwill transfers remain exactly as before.

Rationale Behind Extending the Time Limit

A one-year deadline was often unworkable in real-life scenarios. The bereaved family typically has to manage, among others:

  • Emotional and personal upheaval after the member’s death;
  • Completion of succession formalities like:
    • probate of Will,
    • obtaining succession certificates,
    • securing legal heir certificates,
    • resolving intra-family disagreements;
  • Determining a fair value for the professional practice and its goodwill;
  • Shortlisting and engaging with a suitable practising Chartered Accountant willing to purchase the goodwill;
  • Negotiating commercial terms and finalising documentation.

These steps frequently extend beyond a year, particularly where:

  • Multiple legal heirs are involved,
  • The estate is complex,
  • Litigation or disputes exist among family members, or
  • The practice has a wide client base spread across locations.

By granting a three-year window, ICAI has aligned the ethical framework with these practical timelines, thereby reducing the risk that the value of an established practice is irretrievably lost merely because procedural steps could not be rushed through within a 12‑month period.

Practical Impact of the Extension

The new three-year period provides several tangible advantages:

  • More realistic timeframe to complete all succession-related legal and administrative formalities.
  • Adequate opportunity for:
    • conducting proper valuation of goodwill and practice;
    • identifying an appropriate practising Chartered Accountant as purchaser;
    • negotiating balanced commercial terms instead of distress-sale conditions.
  • Reduced pressure to hurriedly finalise transfer documents purely to comply with a rigid deadline.
  • Better preservation of goodwill value, as the family can plan a structured and orderly transfer.

Prospective purchasers also benefit because:

  • They gain more time to perform due diligence on the practice, client base, systems and liabilities.
  • They can structure financing and transition arrangements more carefully.
  • They are less likely to make decisions under deadline-driven pressure.

Who Can Purchase the Goodwill?

Restriction to practising Chartered Accountants with COP

The goodwill of the proprietary concern of a deceased Chartered Accountant is not freely transferable to any person. It can be transferred only to a member of ICAI who holds a valid Certificate of Practice (COP).

Key features:

  • The intending purchaser must be a practising CA with a valid COP at the time of seeking approval.
  • A formal application is required to be filed with ICAI for approval of such transfer.
  • The extension from one year to three years does not dilute or modify this eligibility condition.

Note:
No transfer of goodwill to non-members or to non-practising members is recognised under this framework.

Time Limit for Filing Application with ICAI

In line with the extended window:

  • The application for transfer of goodwill may now be filed at any time within three years from the date of death of the member.
  • Previously, this application had to be moved within one year.

Aside from this revised outer limit, all other requirements involved in filing and processing the application remain the same.

Documentation Required for ICAI Approval

Essential enclosures along with the application

The application for transfer of goodwill filed with ICAI should typically be supported by: