REGARDING RETIREMENT OF PARTNER
This query is : Resolved
Suresh S. Tejwani
(Querist)
18 April 2025
IF ONE CA PARTNER RETIRED FROM CA FIRM THEN WHAT TO DO TO RETAIN OWN FIRM (PARTNER'S OWN INDIVIDUAL FIRM) WHETHER APPLY FOR RECONSTITUTION OR RAISE DEMERGER REQUEST?
12 August 2025
Key points:
Retirement from existing firm:
The partner must officially retire as per the partnership deed of the existing CA firm.
Notify the Institute of Chartered Accountants of India (ICAI) about the retirement.
Retaining own individual firm:
The retiring partner can continue their own individual practice as a sole proprietor or a new firm.
If this was an existing separate firm before joining the partnership, it can continue without change.
Regarding ICAI registration:
For the retired partner’s individual firm (own practice), the existing registration (if any) continues.
For the old partnership firm, if there is a change in composition (partner retiring), the firm must inform ICAI and get the partnership firm registration updated — this is called reconstitution of the firm.
Reconstitution or Demerger:
Reconstitution means change in the partnership firm composition (partner retiring, admission of new partner, change in profit-sharing ratio).
Demerger is splitting one firm into two or more separate firms with assets, clients, etc., divided.
In case the retiring partner just leaves and continues individually without dividing firm assets or clients formally, reconstitution applies.
Demerger is applicable if the retiring partner is taking a part of the firm’s assets, clients, goodwill, etc., to form a new separate firm.
If the retired partner wants to continue only their own individual firm/practice and not take any part of the existing firm’s assets/clients, then just notify ICAI about retirement and continue own firm as usual — no demerger needed. The old firm will file for reconstitution.
Retirement from existing firm:
The partner must officially retire as per the partnership deed of the existing CA firm.
Notify the Institute of Chartered Accountants of India (ICAI) about the retirement.
Retaining own individual firm:
The retiring partner can continue their own individual practice as a sole proprietor or a new firm.
If this was an existing separate firm before joining the partnership, it can continue without change.
Regarding ICAI registration:
For the retired partner’s individual firm (own practice), the existing registration (if any) continues.
For the old partnership firm, if there is a change in composition (partner retiring), the firm must inform ICAI and get the partnership firm registration updated — this is called reconstitution of the firm.
Reconstitution or Demerger:
Reconstitution means change in the partnership firm composition (partner retiring, admission of new partner, change in profit-sharing ratio).
Demerger is splitting one firm into two or more separate firms with assets, clients, etc., divided.
In case the retiring partner just leaves and continues individually without dividing firm assets or clients formally, reconstitution applies.
Demerger is applicable if the retiring partner is taking a part of the firm’s assets, clients, goodwill, etc., to form a new separate firm.
If the retired partner wants to continue only their own individual firm/practice and not take any part of the existing firm’s assets/clients, then just notify ICAI about retirement and continue own firm as usual — no demerger needed. The old firm will file for reconstitution.
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