This is a warning about Professional Indemnity insurance for accountants. We advise you to check the small print on your policy. If you are excluded from advising on 'mergers and acquisitions' you will not be able to advise businesses on incorporation, disincorporation as well as share sales, reorganisations, demergers and so on.
This warning comes about after an ICAEW firm was sold "an accountants' policy" by insurers Hiscox, and despite informing the insurer that the firm advised on the tax implications of business sales and disposals, a policy came back for ICA members with an exclusion for any work relating mergers and acquisitions. From subsequent conversations with the insurer it became clear that this included on advising sole traders on incorporation. The policy was cancelled.
It seems clear that the type of "accountant's policy" outlined above is unsuitable for the majority of accountancy firms because you will invariably have to advise on some aspects of a merger and acquisition during the life of even the smallest business. We think that it is quite possible that some in practice will not consider advising on incorporation as advising on a merger or acquisition, and whilst this is pretty low risk (sale between connected parties) you will still want to be covered, just in case you have for example, failed to recommend one relief in preference for another. We suggest that you check the small print with regard to an exclusion for mergers and acquisitions.
Feedback from Hiscox
Following a lengthy conversation Hiscox are anxious to say that there has been a misunderstanding in the above case because they "used the wrong words". The firm would have in fact been covered as a member of the ICAEW (however difficult it is to see that from the correspondence!). Clearly they want to keep insuring accountants so perhaps they will create some policies containing the right words and will after all insure for mergers and acquisitions.
