By Mr. Pascal Lepage, partner and Mrs. Valérie Lachance, lawyer
Since its enactment on March 22, 2007, the Regulation respecting the practice of the medical profession within a partnership or a company (the “Regulation”), every physicians registered on the membership roll of the Collège des médecins du Québec (the “Order”) may, as much as they comply with the terms and restrictions set out in the Regulation, practice their professional skills within a joint-stock company (“JSC”) or a limited liability partnership (“LLP”). Obviously, each physician practicing within a partnership will still be subject to his ethical duties set out in the Code of ethics of physicians; in case of failure to comply with those duties, a physician might be barred from practicing his profession by the Order, weather or not he is practicing medicine within a partnership. In fact, after having completed his incorporation at the Registraire des entreprises du Québec (“REQ”) (or, at Corporations Canada) and after obtaining a Quebec business number (“NEQ”), the physician must file an authorization request with the Order which will be granted or declined following the completion of the steps described below.
Step 1 –Declaration authorising medical practice within a partnership
Any physician wishing to practice within a partnership must complete the Declaration for authorization to practice the medical profession within a partnership or company. The statements provided in that document need to be true and in consistent with the articles of incorporation annexed to the certificate of incorporation of the JSC or the agreement establishing the LLP.
Step 2 – Written confirmation attesting to the existence of the partnership
The physician must annex to his authorization request a copy of the certificate of incorporation (JSC) or a certificate attesting to the existence (LLP) of the newly formed partnership.
Step 3 – Liability Umbrella Insurance
The physician must then contact his insurer to inform them that he will practice his medical profession within a partnership. The insurer will provide a written confirmation attesting that the partnership has professional liability coverage pursuant to Division III of the Regulation. In fact, each physician practicing the medical profession within a partnership must, in order to be authorized to do so, [TRANSLATION] “provide and maintain for the partnership, either under an insurance or suretyship contract, or by adhesion to a group insurance plan set up by the [Order], or either by subscribing to a professional liability insurance fund established pursuant to Section 86.1 of the Professional Code (chapter C-26), a coverage against any liability that the partnership may incur by reason of a faulty or negligent act committed by physicians while practicing their medical profession within a partnership” (Section 11 of the Regulation). Let us also point out that pursuant to Section 14 of the Regulation, the compulsory coverage is not required if the partnership qualifies for the assistance provided by the Canadian Medical Protective Association (“CMPA”).
Step 4 – Fees
A $300 fee is payable with the filing of the Declaration for authorization to practice the medical profession within a partnership or company. When several physicians are listed in the partnership being the object of the authorization request filed with the Order, each of them must pay the required fee.
Step 5 – Transmission of documents to the Order
Finally, the physician must file with the Order the abovementioned documentation, being the duly completed and signed Declaration for authorization to practice the medical profession within a partnership or company, a written document attesting of the existence of the partnership, a written confirmation certifying the liability umbrella insurance coverage, as the case may be, and a cheque payable to the Order for the prescribed fees in connection with the Declaration for authorization to practice the medical profession within a partnership or company.
Upon reception of those documents, the Order will determine if the physician complies with the Regulation’s requirements. In the weeks following the filing of the request, the Order will forward a written confirmation to the physicians identified in the Declaration for authorization to practice the medical profession within a partnership or company.
MEDICAL PROFESSION PRACTICE WITHIN A PARTNERSHIP
As previously mentioned, the physician must comply with the terms and restrictions set out in the Regulation in order to be granted the right to practice within a JSC or a LLP.
By the terms of paragraph 1(1) of the Regulation, all the voting rights attached to the shares or the partnership shares must at all time be held:
− either by at least one physician;
− or by a legal person, a trust or a corporation the voting rights of which are all held by at least one physician;
− or by a trust of which at least 50% of the voting rights is held by at least one physician and at the most 50% by one of the professionals listed in subparagraph c) of paragraph 1) of section 1 of the Regulation, being a certified administrator, a lawyer, a professional chartered accountant or a notary; or
− or both by some of the persons, trusts or corporations mentioned above.
Furthermore, in addition to the persons mentioned in paragraph 1(1) of the Regulation, the only persons or corporations entitled to hold shares or partnership shares (voting or non-voting) of the entity, as the case may be, are:
− physicians;
− the spouse, any relatives or relatives by affinity of a physician holding voting rights;
− legal persons, trusts or other corporations of which all the voting shares are held by physicians or their spouses, relatives or relatives by affinity of a physician holding voting rights;
− a trust of which at least 50 % of the voting shares is held by physicians or the spouse, relatives or relatives by affinity of a physician holding voting rights and at the most 50 % by only one of the professionals listed in subparagraph d), paragraph 2) of section 1 of the Regulation, being a certified administrator, a lawyer, a professional chartered accountant or a notary; or
− both by some of the persons, trusts or corporations mentioned above.
The articles of incorporation of the JSC or the agreement establishing the LLP shall expressly make reference to those restrictions and shall also state that the JSC or LLP is constituted with a view of practising professional activities.
As for the board members of an JSC and the partners or directors named by the partners of a LLP, those persons must be registered physicians exclusively.
CONCLUSION
Professional incorporation comes with its advantages and disadvantages, according to each own personal situation. Age, career opportunities and family situation may affect the relevancy of practising professional skills within a partnership.
It his thus highly recommended to consult your fiscal and legal advisors in order to establish the tax strategy that fits most your personal situation and needs, which in turn will allow the maximization of the professional incorporation benefits.
For any additional questions relating to the incorporation of physicians in the Province of Quebec, please feel free to contact the authors or your corporate law advisor.