Medical Professional Corporations
The Ontario Government has passed regulations that allow doctors to include family members as non-voting shareholders in their medical professional corporations. The regulations under the Business Corporations Act were published on December 19th, 2005. The changes for doctors and dentists came into force January 1, 2006.
According to the regulations, the only shareholders that can hold non-voting shares are spouses, parents and children. In the case of a minor, the shares can be issued to “one or more individuals, as trustees, in trust for one or more children of a voting physician shareholder who are minors, as beneficiaries.”
The College must be notified after a change of shareholders has occurred and a Statutory Declaration signed by the director of the Corporation must also be included with notification. If a change in shareholders involves an amendment then a copy of the Articles of Amendment must be provided as well.
What follows is a sample of the type of organizational issues we have been asked to address as a result of the recent changes to the Business Corporations Act and related Regulations.
1. Is a trust permitted for minor or adult children?
It appears trusts are not permitted for anyone other than minor children. Only where minor children of a voting shareholder are involved is indirect ownership allowed. Shares may be issued to a trustee or trustees for the children as beneficiaries.
2.What is the definition of ‘child’?
While the Business Corporations Act does not define ‘child’, s.252(1) of the ITA defines ‘a child of taxpayer’ as
- a person of whom the taxpayer is the natural parent whether the person was born within or outside marriage;
- a person who is wholly dependent on the taxpayer for support and of whom the taxpayer has, or immediately before the person attained the age of 19 years had, in law or in fact, the custody and control;
- a child of the taxpayer’s spouse or common-law partner;
- an adopted child of the taxpayer; and
- a spouse or common-law partner of a child of the taxpayer.
3. Is a holding company permitted?
Holding companies are not permitted. As discussed under the first point, despite the language of the Business Corporations Act, only direct ownership of shares is allowed, except for a trust arrangement for minor children.
4. Who may be appointed an officer or director of a medical professional corporations?
Only shareholders holding voting shares (ie. members of the CPSO or RCDSO) may be appointed as officers or elected as directors of a medical professional corporation.
It may be in a medical professional’s best interest to incorporate and add family members as shareholders of the medical professional corporation. If you are doing so, it is important to discuss with your advisors how to best organize your medical professional corporation. If you have any questions or wish to discuss any of these matters further please do not hesitate to contact us at your convenience.