SCACPA reminds you that your annual firm renewal process cannot be completed without naming a designated successor.
The South Carolina Board of Accountancy wrote in its 2nd Quarter 2018 newsletter: “As per Regulation 1-12(A), adopted in 2007, all South Carolina firm licensees must have a designated successor who will assume responsibility for client files in the case of a licensee’s incapacity or death. The successor must be an active licensee who has agreed to assume the responsibility.”
Here is the complete wording of Regulation 1-12(A) of the South Carolina Code:
1–12. Safeguarding Client Files When a Licensee is Incapacitated, Disappears, or Dies.
(A) Each licensee shall designate a partner, personal representative, or other responsible party to assume responsibility for client files in the case of incapacity or death of the licensee.
(B) Where the licensee is incapacitated, disappears, or dies, and no responsible party is known to exist, the Administrator of the Board may petition the Board for an order appointing another licensee or licensees to inventory the files and to take actions as appropriate to protect the interests of the clients.
The order of appointment shall be public.
(C) The appointed licensee shall:
(1) Take custody of the licensee’s files and trust or escrow accounts.
(2) Notify each client in a pending matter and, in the discretion of the appointed licensee, in any other matter, at the client’s address shown in the file, by first class mail, of the client’s right to obtain any papers, money or other property to which the client is entitled and the time and place at which the papers, money or other property may be obtained, calling attention to any urgency in obtaining the papers, money or other property;
(3) Publish, in a newspaper of general circulation in the county or counties in which the licensee resided or engaged in any substantial practice of accounting, once a week for three consecutive weeks, notice of the discontinuance or interruption of the accountant’s practice. The notice shall include the name and address of the licensee whose practice has been discontinued or interrupted; the time, date and location where clients may pick up their files; and the name, address and telephone number of the appointed licensee. The notice shall also be mailed, by first class mail, to any errors and omissions insurer or other entity having reason to be informed of the discontinuance or interruption of the accounting practice;
(4) Release to each client the papers, money or other property to which the client is entitled. Before releasing the property, the appointed licensee shall obtain a receipt from the client for the property;
(5) With the consent of the client, file notices or petitions on behalf of the client in tax or probate matters where jurisdictional time limits are involved and other representation has not yet been obtained; and
(6) Perform any other acts directed in the order of appointment
The Importance of a Practice Continuation Agreement
Your clients rely on your practice because of your ability to provide dependable, timely service.
Yet in the case you encounter a sudden disability – or death – do you have a plan in place for your practice to quickly and efficiently operate without you?
A Practice Continuation Agreement is a contract that spells out who will be ready to step up and pick up the pieces during a time when your family, staff and clients might otherwise not know what to do.
Your accounting practice might be the largest asset in your estate, and a Practice Continuation Agreement can be vital in preserving its value to your heirs. At the least, it can help map your path to wind down into retirement and you choose to let others pick up where you leave off.
For more tips on what’s in store for this year’s license renewals, go to this SCACPA blog post where we review the BOA staff’s advice, including a link to their “Renewal Survival Kit.” https://www.scacpa.org/sc-board-of-accountancy-q3-newsletter-offers-tips-for-annual-license-renewals/
The AICPA breaks down some topics for thought on these matters as taken from its publication “Practice Continuation Agreements: A Practice Survival Kit,” by John A. Eads.
Through eight brief chapters, these pages offer insights such as:
- The three types of Continuation Agreements: One-on-One Agreements; Group Agreements; State Society Plans (a.k.a. an emergency assistance plan).
- Your surviving spouse and family might not know how your business operates, but they should be educated on how the succession plan will function and who will carry it out.
- If you have a specialized practice, will your successor possess the right knowledge to maintain the competitive advantages your clients expect?
- Noncompetition clauses are important to make sure your successor doesn’t walk away with your clients when you’re ready to return from your disability.
- Use networking to identify potential partners for a Practice Continuation Agreement. But while it might make sense to select an experienced peer, keep in mind someone’s age and health status might impede their eagerness to be ready to actively execute a full and swift takeover of your portfolio.
- After you put in the time and effort of drawing up a Practice Continuation Agreement, include room for annual arbitration with your successors so that any changes to your practice over time (client and staff rollover, leases, etc.) are reflected in your emergency plans.