Eligibility considerations when making changes to your firm structure

Voting rights

Regulatory issues can arise where voting rights are held by corporate principals or by corporate owners of the audit firm. The Audit Regulations and Guidance require a firm’s voting rights to be held by audit-qualified individuals or registered audit firms. We can’t look through a group structure when assessing this requirement and only look at the person/body that holds the direct voting rights, rather than any indirect holdings.

Corporate principal with voting rights

It is likely the corporate principal will need to apply for audit affiliate status. However, if the voting rights held by the corporate principal are to be included when assessing the audit-firm’s eligibility, the corporate principal will need to be audit-registered.

Corporate principals and owners

Some firms add corporate principals to their firm structure in addition to individuals, some have corporate principals only and others have a combination of the two.

Additionally, some firms add corporate owners above the main accountancy practice. If your main practice is audit-registered, you will need to take into account the requirements of the Audit Regulations and Guidance when you add a corporate holding company.

Corporate owner with voting rights

If a firm’s majority voting rights are held by a corporate owner then for these rights to be included when assessing the audit-firm’s eligibility, the corporate owner will need to be audit-registered. For example, if 100% of the audit-firm’s voting rights are held by a corporate holding company, which is itself controlled by audit-qualified individuals, the holding company must be audit-registered even if it has no audit clients.

Audit compliance principal

Some audit-registered firms may have solely corporate bodies as principals, not individuals. This is acceptable as long as the audit compliance principal is a responsible individual employee and is also a member of the firm’s management board. Such firms should consider whether they have enough responsible individuals in the firm to carry out, and be responsible for, the audit work and to sign audit reports.

• Audit eligibility status case studies
• Check and monitor your firm’s audit eligibility

When adding corporate principals to a firm that holds a DPB (Investment Business) licence, the DPB contact principal must be a person. The corporate principals may also need to apply for DPB affiliate status if they are not DPB licenced or registered for audit work.

• DPB Investment Business eligibility case studies

Read regulatory advice about when a firm should apply for a probate licence.

Please note if an ICAEW member firm is found to have been operating outside this regulatory framework then this will be treated as a disciplinary offence.

Probate eligibility

Authorised firms must ensure:

• all principals and/or shareholders are authorised to conduct probate work; and
• non-authorised persons do not control 10% or more of the voting rights of the company/LLP/other body.

Licensed firms must:

• appoint a Head of Finance and Administration (HoFA) and/or a Head of Legal Practice (HoLP);
• ensure principals hold affiliate status if they are not an accredited probate firm, a registered auditor, a DPB (Investment Business) licensed firm, an ICAEW member, ICAS member, CAI member or member of another approved regulator;
• ensure only principals and employees of a firm are authorised individuals. We can’t licence sub-contractors or consultants; and
• ensure all non-authorised persons holding a material interest have been approved by ICAEW (this includes a person holding at least 10% of the shares in a body).

• Find out more including eligibility case studies

When adding corporate principals to a licensed practice, the licensed practice contact principal must be a person. The corporate principals may also need to apply for licensed practice affiliate status if they are not already registered for audit work, DPB licensed, accredited for probate or holding an alternative ICAEW affiliate status. There must always be at least one licensed practitioner for the relevant category of licensed work.

• Access the Licensed Practice Scheme Handbook

You also need to ensure your firm is eligible to use the description ‘Chartered Accountants’. The Use of Description Chartered Accountants Regulations set out when a firm may describe itself as ‘Chartered Accountant’ and the procedural rules for principals who are not a chartered accountant who must become a general affiliate. Please note the ‘use of description’ member firm definition is different to the definition in the Principal Bye-laws for an ICAEW member firm.

An accountancy practice (regulated or unregulated) may be part of a corporate group. A group entity (which may be a company or LLP) can only be described as a ‘Chartered Accountant’ in the following circumstances.

In the case of a parent entity, it is:

• controlled by chartered accountants; and
• over 50% of the income of the group is derived from public practice (a holding company can be dormant).

In the case of a subsidiary entity, it is:

• engaged in public practice;
• majority owned by a parent company that is controlled by chartered accountants; and
• part of a group where the parent company can use the description.

In the case of a company, 50% or more of the directors must be chartered accountants. Any directors in a parent or subsidiary company that uses the description, who are not chartered accountants, need to become affiliates.

If your firm is not eligible to use the description 'Chartered Accountants', it can apply for permission to use the description.

• Please complete and submit the use of the description form

For structures with a parent and subsidiary, please also complete Appendix A in respect of the parent entity. If there are holding companies between the trading subsidiary and the ultimate parent, please complete an Appendix A for each entity. For LLPs with corporate principals, please complete a separate Appendix A for each principal.

• Access Appendix A – Application to Use the Description ‘Chartered Accountant’

If the voting rights or shares in an accountancy practice (regulated or unregulated) are held by a corporate body, you need to carefully assess whether it still meets the ICAEW member firm definition set out in the Principal Bye-laws.

AML supervision and member firm definitions

The member firm definition which determines if you are supervised by ICAEW for money laundering is not the same as the definition of which firms can use the description ‘Chartered Accountants’.

• Check if ICAEW is your AML supervisor
• Check if you can use the description ‘Chartered Accountants’

An ICAEW member firm is:

• a member engaged in a public practice as a sole practitioner; or
• a partnership engaged in public practice of which more than 50 per cent of the rights to vote on all, or substantially all, matters of substance at meetings of the partnership are held by members; or
• a limited liability partnership engaged in public practice of which more than 50 per cent of the rights to vote on all, or substantially all, matters of substance of the partnership are held members; or
• any body corporate (other than a limited liability partnership) engaged in public practice of which:
• 50 per cent or more of the directors are members; and
• more than 50 per cent of nominal value of the voting shares is held by members; and
• more than 50 per cent of the aggregate in nominal value of the voting and non-voting shares are held by members. 

Please note: new guidance took effect on 1 January 2024. The ICAEW Statement on members engaging in public practice provides more detail.

ICAEW member firms are automatically subject to Practice Assurance and money laundering supervision by ICAEW.

There are some common situations where firms find that they do not qualify as a ‘member firm’ under the Principal Bye-laws, including when the firm is a subsidiary of another corporate entity, irrespective of the ownership and activities of its parent.

If your firm is not a member firm under the definition in the Principal Bye-laws, we may still be able to supervise you for anti-money laundering under a contractual arrangement.

If you're interested in ICAEW supervising your practice under MLR17, please complete the application forms.

If you have any questions about supervision by ICAEW, please email AMLR@icaew.com

When considering a change of legal entity, (for example, sole practitioner to partnership; partnership to limited company; limited company to limited liability partnership), if your firm is registered for audit, licensed for DPB (Investment Business) activities, licensed as an ATOL Reporting Accountant or accredited for probate, you must make new applications for these registrations.

• Access full application details

An audit registration, DPB (Investment Business) or probate licence or licensed practice status cannot be transferred between legal entities.

New applications are processed by the Regulatory Support team who will ensure that all of the necessary information is obtained before the application is passed to the case manager team for consideration. Your application will then be allocated to a case manager who will assess the information and may require further information/explanations before the application can be approved. In some cases the case manager will not be authorised to approve the application and it will need to be referred to the relevant regulatory committee to consider.

Please allow 8-12 weeks from the date the Regulatory Support team has obtained all of the required application information and has passed your application to the case manager team.

Please note this is only an indication of timing. The actual processing time may vary when the teams are experiencing a large volume of applications, in holiday periods or if the application is complex and needs to be referred to the committee.

The new legal entity can’t carry out regulated work until your application(s) is/are approved. As part of the application, we will transfer any fees paid by the original firm for that fee-year. If you only notify us of a change to the legal entity on the annual return, rather than when the change took place, this may lead to regulatory or disciplinary action as the new entity will not be properly regulated.

If your firm is not a member firm, audit registered or DPB (Investment Business) licensed, it may not be able to use ICAEW’s consumer credit arrangements. Any consumer credit activity undertaken has to be incidental to the accountancy services a firm provides. FCA authorised firms can’t use ICAEW’s consumer credit arrangements, even if they meet the other criteria. There’s more information at icaew.com/ccl.