How do I sell an accounting practice in Ontario?

Selling an accounting practice in Ontario means dealing with CPA Ontario, which regulates registered firms, as well as the buyer. The regulator’s rule is direct: members and firms must notify the Registrar of any significant change in practice, composition or structure. Its examples include a merger, acquisition, closure or dissolution of a firm. Ontario’s Public Accounting Act, 2004 and the Business Corporations Act add rules about who may practise and who may own a professional corporation. This page covers Ontario only. The wider mechanics of a sale, such as client consent and work in progress, are in selling an accounting practice in Canada; this page keeps to what Ontario adds.

Report the change to CPA Ontario

CPA Ontario’s page on reporting firm changes says members and firms must notify the Registrar of any significant change in practice, composition or structure, before the change takes place or within 30 days after it. Its examples include a merger, acquisition, closure or dissolution of a firm, and it points to section 10.2.5 of its By-law for details. It also says a firm registration application is needed if the firm structure changes. The same page says that if a change is not reported, the rights and privileges of the member and firm may be suspended. A seller should therefore treat the report as part of closing, not as an afterthought. Ask CPA Ontario what it needs for the specific structure of the deal, whether the practice is a partnership, a professional corporation or a sole practice, since the page speaks in general terms.

If the firm closes after the sale

CPA Ontario lists a sale among the reasons a firm may close. It says a firm may apply to surrender its registration, but the application will not be accepted without proof of discovery insurance for a period of six years. It describes discovery insurance as an extended reporting period, to be maintained for six years from the effective date of the firm closure. The seller’s professional liability coverage therefore matters at the sale stage. Ask your insurer about it early, and ask the buyer whether the deal changes which firm’s coverage responds to past work.

Who may practise and who may be paid

The Public Accounting Act, 2004 says that, unless it holds a valid certificate of authorization, a corporation shall not practise as a public accountant. A person’s licence under the Act is revoked on the day the person ceases to be a member of CPA Ontario. Section 37 adds a consequence for fees: no person is entitled to recover costs incurred or charges made as a public accountant unless licensed when the costs were incurred or the services were rendered, and a corporation cannot recover them unless it was a professional corporation holding a valid certificate of authorization at that time. A buyer should confirm that its own licence or certificate is in place before it takes over any public accounting engagement. Otherwise section 37 may bar recovery of the fees for that work.

Professional corporations and who can hold the shares

If the practice is a professional corporation, a share sale raises an ownership question. Subject to subsection 3.2(6), section 3.2(2) of Ontario’s Business Corporations Act requires all issued and outstanding shares of a professional corporation to be legally and beneficially owned, directly or indirectly, by one or more members of the same profession, and all its officers and directors to be shareholders. The Chartered Professional Accountants of Ontario Act, 2017 adds that a professional corporation shall notify the registrar of a change in its shareholders within the time and in the manner and form the by-laws specify. CPA Ontario also says a professional corporation that wishes to practise public accounting needs a certificate of authorization, and to obtain one at least one shareholder must hold a current public accounting licence or apply for one, though a certificate may not be required where the corporation is a partner or shareholder in a firm that issues the reports. Check those rules against the buyer’s own status.

Client records and the buyer’s review

A buyer may ask to see client files, fees and engagement terms before closing. Section 7.2(1) of the federal Personal Information Protection and Electronic Documents Act (PIPEDA) lets parties to a prospective business transaction use and disclose personal information without the individual’s knowledge or consent if the Act’s conditions are met. These include an agreement requiring the organization that receives the information to use and disclose it solely for purposes related to the transaction, protect it with security safeguards appropriate to its sensitivity and, if the transaction does not proceed, return or destroy it within a reasonable time. The information must also be necessary to determine whether to proceed and, if the parties proceed, to complete the transaction. Section 7.2 applies in addition to the circumstances in subsections 7(2) and (3), and section 7.2(4) excludes a transaction whose primary purpose or result is the purchase, sale or other acquisition or disposition, or lease, of personal information. Read it in full before opening files to a buyer.

• Ask CPA Ontario what notice it needs for your structure, and when, so the sale does not put your firm’s rights and privileges at risk
• If your firm will close, price the six-year discovery insurance into the plan, because CPA Ontario will not accept a surrender without proof of it
• Ask the buyer to confirm its own licence or certificate of authorization before it takes over any public accounting engagement
• For a professional corporation, check that every incoming shareholder meets the same-profession ownership rule in section 3.2 of the Business Corporations Act, and diarize the shareholder-change notice to the registrar
• Sign a confidentiality agreement that meets the PIPEDA section 7.2 conditions before any client data is shared