How to buy a veterinary clinic in Prince Edward Island: licences, ownership rules and what transfers

The Prince Edward Island Veterinary Medical Association (PEIVMA) describes itself as the regulatory body for veterinarians and the practice of veterinary medicine in the province. The statute behind it is the Veterinary Profession Act, which sets out who may practise, how a practice may be organized and who may own the shares of a corporation that practises. For a buyer, the ownership rule is the centre of the matter. This guide explains what the Act says, using the province’s office consolidation current to September 22, 2014, how it bears on a share sale as against an asset sale, and what to ask the seller. Read none of it as applying outside Prince Edward Island. For the national picture, start with buying a veterinary clinic in Canada.

Who may practise

Under s.5(11) of Prince Edward Island’s Veterinary Profession Act, no person may practise clinical veterinary medicine unless the person holds a valid licence issued by the Licensing Board and is registered under s.5(1). Each person who practises clinical veterinary medicine in the clinic must meet that test, and a buyer who is not a veterinarian should not expect to deliver clinical services personally. Before you sign, ask the seller to show the licence and registration of every veterinarian who works in the clinic, and confirm with the PEIVMA how those records are kept.

How the practice may be organized

Section 6(1) of the Act allows a person licensed to practise clinical veterinary medicine to do so in his or her own name, through a corporation in which the person holds shares or by which the person is paid a salary, or through a partnership. Those are the three forms the Act names. If the seller operates through a corporation, your purchase will interact with that corporation’s share structure. If the seller practises in his or her own name or in a partnership, the transaction looks different. Find out which form applies before you choose between buying shares and buying assets.

The share-ownership rule

Section 6(2) provides that no corporation may charge a fee for the services of a licensed person unless the shares of the corporation are wholly owned by a person licensed to practise clinical veterinary medicine or by the spouse of such a person, except as the Council otherwise authorizes. Under s.6(3), where a corporation contravenes that rule, the Licensing Board may cancel or suspend the licence of any licensee holding shares in the corporation, and the fees so charged by the corporation are void and uncollectable. If you are not licensed, or your company has unlicensed shareholders, ask a lawyer whether Council authorization is needed before closing.

Transfers of shares to someone not licensed

Under s.6(4), a shareholder who wants to transfer, assign or otherwise alienate shares to a person not licensed to practise clinical veterinary medicine must notify the Council of the intent before doing so, and the Council approves or rejects the transfer. The provision excepts an assignment or alienation for the purpose of securing a loan from a bank or credit union. If the Council rejects and the shares are transferred anyway, the Act says any fees for services charged by the corporation in the practice of clinical veterinary medicine are void and uncollectable. The Act ties that consequence to a rejected transfer, so ask a lawyer what follows if the notice is not given at all. Read s.6 in full, including its subsections, and ask a lawyer how it applies to your structure.

Share purchase compared with asset purchase

Because the rule turns on who owns the shares of a corporation, a share purchase by a buyer who is not licensed engages s.6(4): the selling shareholder must notify the Council before the transfer, and the Council approves or rejects it. In an asset purchase, if the buyer’s vehicle is a corporation that will charge fees for a licensee’s services, s.6(2) applies to that corporation’s own shareholders. Ask a Prince Edward Island lawyer how the rule applies to the structure you choose. Federally, Health Canada runs a dealer’s licence for controlled drugs and substances for veterinary use only, and publishes guidance on the fees that apply, so ask whether the clinic holds one and what happens to it on a sale. BDC’s due-diligence guidance also lists licences and permits among the legal issues to review.

What to ask the seller for

• The licence and registration of each veterinarian in the clinic, as issued by the Licensing Board
• The corporation’s share register and the names of every shareholder, so you can test the share-ownership rule against the facts
• Any past Council authorization under s.6(2), and any record of a share transfer notified to the Council
• Confirmation of how the clinic is organized: own name, corporation or partnership
• Any Health Canada dealer’s licence for veterinary use, with the name of the holder

If you want to see what is listed in this field, browse the healthcare businesses for sale on Deavo. Where s.6(4) applies, the Act requires the notice to the Council before the shares are transferred.