Who can own shares in your professional corporation

Almost every article on this subject says the family-share rule comes from section 3.2 of the Business Corporations Act. Section 3.2 says the opposite. Paragraph 1 of subsection (2) reads: “All of the issued and outstanding shares of the corporation shall be legally and beneficially owned, directly or indirectly, by one or more members of the same profession.” No spouses, no children, no exceptions on the face of it.

The exception is created by subsection 3.2(6), which lets Cabinet exempt classes of health profession corporations. That power was exercised in O. Reg. 665/05, made under the Business Corporations Act and titled Health Profession Corporations. Section 2 deals with physician corporations and section 3 with dentist corporations, and between them they carry the whole family-share regime.

There is a second regulation, and knowing which is which saves an argument. O. Reg. 39/02 under the Regulated Health Professions Act is titled Certificates of Authorization. It restates the same ownership rules as eligibility conditions for holding a certificate, and then adds everything the College administers: the naming rules, the application and renewal requirements, the notice obligations, and the grounds for revocation. One regulation says who may own the shares. The other says what happens to your certificate if the answer stops being true.

The five regulators, side by side

That table is the whole article, and it is worth reading twice if you arrived here having been told that incorporating lets you split income with a spouse. For four of the five, it does not, because the spouse cannot hold shares at all.

What “family member” means, exactly

For physicians and dentists only, the regulations define it tightly: spouse, child or parent of a voting shareholder. Three details in the drafting do real work — and note that while both regulations define “family member,” “child” and “parent,” only O. Reg. 39/02 defines spouse.

“Child” and “parent” both carry an extension for a person who has demonstrated a settled intention to treat the other as a child of the family. That covers step-children and step-parents. CPSO confirms it accepts both — and confirms it does not accept parents-in-law, who are simply not in the definition.

“Spouse” carries no such extension. It means a person you are married to or living with in a conjugal relationship outside marriage. Nothing broader.

And the relationship has to run to a voting shareholder. The regulation defines a “voting physician shareholder” as a College member who owns voting shares. A family member of a non-voting shareholder does not qualify.

And for every other health College — psychotherapy, nursing, optometry, the rest — paragraph 2 of section 1(1) of O. Reg. 39/02 is the whole answer: all of the issued and outstanding shares must be owned by members of the issuing College. No voting and non-voting split, no family carve-out, nothing.

The trust route is narrower than most people expect: non-voting shares only, held legally by one or more individuals as trustees — not a trust company — for children of a voting shareholder who are minors. When the child turns 18 the trust rationale falls away and the child can hold directly as a family member.

The holding company split

This is the part that generates the most confused advice, because the statutory language is identical and the answers are opposite.

The phrase “directly or indirectly” appears in OBCA s. 3.2(2), in Law Society Act s. 61.0.1(4), and in O. Reg. 39/02. The Law Society reads “indirectly” as authorising a licensee-owned holding company, and its information sheet says so plainly: “Holding companies are permitted as shareholders,” provided the holdco’s own shares are restricted to licensees, and “the business of a holding company must be restricted to holding the shares of the professional corporation.” Family members cannot own the holdco either.

CPSO and RCDSO read the same words the other way and prohibit it outright. That is a regulator interpretation difference, not a statutory difference, and no amount of reading the Business Corporations Act will resolve it. If your accountant has recommended a holding company above your medicine or dentistry professional corporation, the College has already answered the question.

Three structural rules that surprise people

Every director and officer must be a shareholder. OBCA s. 3.2(2) paragraph 2. For physicians and dentists the College goes further and requires directors and officers to be shareholders who are College members. The practical consequence: a spouse holding non-voting shares cannot be a director or an officer.

You cannot give away the votes by contract. Section 3.2(4): “An agreement or proxy that vests in a person other than a shareholder of a professional corporation the right to vote the rights attached to a share of the corporation is void.” That closes the workaround of leaving the shares where they must be and moving control elsewhere.

A unanimous shareholder agreement may not be available to you. Section 3.2(5) says a USA in respect of a professional corporation is void unless every shareholder is a member of the profession. A physician’s corporation with a non-voting spouse shareholder therefore has a shareholder who is not a member of the profession — and I have not found any exemption in O. Reg. 39/02 that cures this. If you are relying on a USA in a family-shareholder professional corporation, that is worth a hard look.

Names, fees and the deadlines that revoke certificates

Naming under the health colleges is rigid. The corporate name must include “Professional Corporation,” must include the surname of a College-member shareholder as it appears on the register, must indicate the profession, and must contain no other information. Hence “Smith Medicine Professional Corporation,” and hence the fact that a physician cannot practise through “Downtown Family Health Professional Corporation.” The Law Society is materially more permissive. By-Law 7 asks only that the name be demonstrably true, accurate and verifiable, and not misleading. Number names are prohibited for every professional corporation.

Two traps in that table. RCDSO is explicit that you cannot renew a revoked certificate — miss 31 August and the only route back is a fresh $750 application. And the notice obligation is not just a notice: for physicians and dentists, O. Reg. 39/02 s. 4.1 also requires a director’s declaration signed after the change confirming continued compliance with OBCA section 3.2. Failing to give it is an independent ground of revocation.

Separately, section 4 of the same regulation requires prompt notice of any change to the corporation’s name or articles, with a copy of the endorsed certificate — and subsection (2) provides that failing to do so means the corporation ceases to be eligible to hold its certificate. That is automatic, not discretionary, and it is the reason a routine-looking articles amendment should never be filed without dealing with the College.

If the point was income splitting

For physicians and dentists who can issue family shares, the tax rules have moved a long way since the structure became popular. The tax on split income rules deny the “excluded shares” exception to a professional corporation outright — CRA’s guidance lists the professions caught, including medicine, dentistry, law and accounting — and non-voting shares could never satisfy the 10%-of-votes test in any event.

What is left are the excluded business exception, which requires the family member to be genuinely and substantially engaged in the business, the reasonable return test for family members aged 25 and over, and the exception that arrives when the professional spouse turns 65. That last one is the practical landing point for a lot of couples, and it is worth knowing that it arrives at 65 and not before, rather than discovering it after the shares are issued.

None of which is a reason not to incorporate. It is a reason to be clear about what incorporating is for in your case — deferral, creditor separation, succession — rather than assuming it is for a benefit the rules stopped delivering.