Dental practice ownership rules in New Brunswick

New Brunswick regulates dentistry through the New Brunswick Dental Society, and the Act that continues the Society has a Part on professional corporations. That Part is the starting point for anyone buying or selling a practice that operates through a corporation. It is short, and it speaks directly to who may hold the shares and what happens when a shareholder dies or loses registration. This guide reads that Part as the Society posts it. It does not replace the current Act, the Society’s bylaws and rules, or advice from a lawyer who handles dental transactions in the province. Other provinces run their own regimes, and a rule stated here does not carry over to a practice in another province.

What the Act says about the shares

Section 21(2) of the New Brunswick Dental Act, 1985 says the legal and beneficial ownership of a majority of the issued shares of a professional corporation shall be vested in one or more members, and that those shares shall entitle the members to elect all of the directors. The Act defines a member as a dentist and any person whose name is entered in the educational register or in one of the rosters it provides for. Section 21(3) adds that a member who is a shareholder shall not enter into a voting trust agreement, proxy or any other agreement that vests in a person who is not a member the authority to exercise the voting rights attached to the shares. A shareholder who does so commits an offence. These provisions are about control as well as title: they look at who holds the shares and who votes them.

If a shareholder dies or loses registration

Section 21(6) lets the Registrar revoke a professional corporation’s licence, or withhold its renewal, where any of the conditions in subsections (1), (2), (3) and (4) no longer exist. Subsection (7) gives a limited cushion. If a corporation stops meeting the share-ownership or practice conditions only because a member died, had a name struck off or removed from a register or roster, or had a licence suspended or revoked, subsection 21(7) of the Dental Act gives it one hundred and eighty days from that event to fulfil the condition. If it does not, the Registrar shall revoke the corporation’s licence. For a seller, that period matters in an estate sale. For a buyer, it is a reason to ask before signing whether any current shareholder’s registration is under a suspension or a condition, because the period runs from the event itself and not from the day anyone learns of it.

Who may practise through the corporation

Section 21(4) says the practice of dentistry on behalf of a professional corporation shall be carried on by dentists or by persons whose names are entered in the educational register. Section 21(5) then deems the practice not to be carried on by clerks, secretaries, dental hygienists, dental assistants and other employees who perform services that are not usually and ordinarily considered by law, custom or practice to be services that only a dentist may perform. The Act therefore separates the people who practise from the employees who support them. Section 21(9) requires the corporation’s name to contain the words “Professional Corporation” or “Corporation professionelle”. Section 22(2) says the liability for professional services is not affected by the fact that the practice is carried on as an employee of and on behalf of a professional corporation, so working through the corporation does not change the liability of the person who provides the services.

Patient records in a sale

The Society’s Rule 5 deals with transferring patient dental records. It states that records are only transferred on the written request of the patient or the patient’s legal guardian, and it supplies a consent form for that purpose. Rule 5 also says dentists should retain original records and provide copies, and that, because the Limitations of Actions Act permits civil actions for fifteen years, dentists are required not to destroy records during that period, which runs fifteen years after the patient’s nineteenth birthday for a minor. Rule 5 covers patient requests, complaints, police warrants and office business disputes, and does not mention a practice sale. Do not assume it answers how a patient list changes hands at closing. Ask the Society how it expects records to be handled when a practice is sold, and who is the custodian afterward. Get that position in writing.

What the Act does not settle

Section 21(2) speaks of a majority of the issued shares. In the Part read for this guide, the Act does not say who may hold the rest. Subsection 20(4) lets the Board make bylaws regulating the practice of dentistry by professional corporations and requiring reports, information and returns, and subsection 20(3) applies the provisions of the Act, bylaws and rules applicable to a member to a professional corporation with all necessary modifications, unless otherwise expressly provided. The bylaws and rules therefore matter as much as the Act, and a buyer should read them and not only the statute. For the corporate filing itself, the Government of New Brunswick has a service page on incorporating or registering a business under the Business Corporations Act. The Society posts a consolidation of the Dental Act, and a statute can be amended after a copy is posted, so confirm the version in force with your lawyer. For how structure affects a deal more broadly, see asset sale versus share sale.

Questions to settle before signing

These questions follow from the Act’s text. None has a general answer, and the Society and your lawyer are the right people to put them to.

• Confirm the corporation’s name is entered in the corporations register, and ask what conditions or limitations its licence carries under section 21(8).
• Ask who legally and beneficially owns every issued share, and whether any voting trust, proxy or similar agreement exists, given section 21(3).
• Ask whether any shareholder has died, been struck off or had a licence suspended, and whether the 180-day period in section 21(7) of the Dental Act is already running.
• Ask which bylaws and rules apply to professional corporations, and what the Society must be told when shareholders or directors change.
• Ask the Society in writing how patient records are meant to move with the practice, since Rule 5 ties the transfer of records to a patient’s written request.