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Selling practice, file transfer & data protection

Help, I am selling and ICAEW have advised I need permission from every client

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I am confused.

I know data protection is vitally important and would never so much as give out a client's name, but I am selling my business and don't understand how I can do this without giving the buyer knowledge of the clients details so they can a) make an informed decision b) contact the clients and c) deal with any professional clearance if the clients decide to go elsewhere. 

ICAEW are saying I have to contact each client separately for permission to give access to their information before the sale is agreed.  If I do this, I think I will lose a lot of clients prior to the sale no matter how fabulous I tell them the new accountant is and will therefore lose a large part of the value of my business and put the sale at risk altogether. 

Practice sales I have been aware of have always been produced as a fait accompli to the clients, hence they are more likely not to bother going elsewhere. I was just planning to do the same - write a nice letter making it sound positive introducing the new lady, then she gets in touch with them.

I cannot be available indefinitely to hand over to umpteen different accountants if the clients choose to go elsewhere as I am selling due to health reasons.

Does anyone have any experience of this?

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By frankfx
26th Apr 2019 08:28

Have you contacted any of the established accountancy practice brokers.?

I am sure that they have practical solution and ideas to help you work through this maze of compliance.

The accountant acquiring your client base may also have data compliance obligations that have escaped their attention.

As stated above, have a word with a broker.

Let us know how you get on.

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26th Apr 2019 09:31

Sounds like GDPR has moved the goalposts!

When we did this (pre GDPR) we did exactly what you thought. We even checked this with ICAEW who were OK with it, but they did point out that if the vendor isn't to be a partner/director in the ongoing firm, then we had to do identity checks on all of the purchased clients.

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26th Apr 2019 10:09

I would have thought that were was a legal entity issue here and if the clients are clients of a limited company then you can sell the shares of the limited company to someone else. If you are a sole trader or even a partnership I can see the issue here.

There is, of course, an issue as to engagement letters and other contracts as to what permissions there are.

Disclaimer: I am not a lawyer or accountant.

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26th Apr 2019 10:57

Sometimes bullshit baffles brains !

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By Ian Bee
26th Apr 2019 11:21

I wonder how large partnerships deal with this on a merger?

I can see a difference as the same partners will transfer to the new place but still there is a new entity of some form taking over the old practice clients

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to Ian Bee
26th Apr 2019 12:51

I would have thought that if the entity was an LLP then that has a sufficient of a legal personality as to count as the same organisation. Obviously a partnership that is not an LLP could have a different approach. However, I don't know exactly how GDPR approaches this.

I cannot think, however, that a traditional partnership act partnership would have to get clients permission to add a new partner. Still I am not a lawyer.

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26th Apr 2019 14:53

I’m not sure why you would want to provide individual client data for your whole client base to the buyer *before* the sale, but I agree with ICAEW that sharing personal data in this way may well require individual consent. If the buyer wants to do due diligence on a sample, you should probably redact the sample.

That said, there is a common myth that GDPR requires consent for processing of personal data. As set out on the ICO website, there are six lawful bases:
https://ico.org.uk/for-organisations/guide-to-data-protection/guide-to-t...

Once the sale is concluded, ‘Legitimate interest’ seems to me to be a reasonable basis to transfer the client files (and hence all of the personal data) to the buyer.

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to paul.benny
26th Apr 2019 15:05

That is a good point, but it would require the right material in the privacy notice and any contractual documentation.

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26th Apr 2019 18:16

I purchased a small practice last year and integrated it into my own existing firm - I am ACCA regulated, vendor unregulated.

GDPR was not considered an issue. We bought the client list and files, and they were transferred to us. We contacted all clients with new engagement letters and requested new ID&V.

As is normal, onboarding rate was around 80%, but of those who didn't we only had a couple who requested their files and we gladly passed them over. One client dropped a Subject Data Access Request on us middle of January, as he thought that would be the best way to get handover to his new accountant in time for 31/1. He withdrew it when we explained we were nice people, and "please" would have worked just as well!

Musing, I suppose its more the vendors issue as the person releasing data, although the purchaser could be processing it without a consent. But as paul.benny says there are other grounds for processing other than consent, and I would think it arguable this is "legitimate interest". Arguably it would also be as big a sin to stop acting for client and not give continuity of some sort.

Our transaction worked out OK, and I would do the same again. If a vendor wanted to obtain client consent to transfer files then I wouldn't worry as it comes off clawback. If I was selling, I think I would endeavour to work around the requirement, maybe notifying clients and giving a limited opt opt.

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By meadow
30th Apr 2019 10:24

I looked at doing this work & even attended day at ICAEW on the topic. My mother recently died & I can honestly say that the work is mind numbing & I am so glad I didn't go ahead with the qualification. I have also never been asked to do probate work so I think it would not have been money well spent & I run a local small general practice.

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