Who can own an accounting firm in Quebec

A Quebec accounting firm is not an ordinary company that anyone with the money can buy. A chartered professional accountant who practises inside a firm organized as a company or partnership has to meet conditions set by regulation, and many of them are about who holds the voting interests and who sits on the board. That can shape the sale of a firm. This guide describes what the Ordre des CPA du Québec’s current regulation says, so that a seller or buyer knows which questions to put to the Order and to a lawyer before agreeing on a structure. The wording here is a plain-language paraphrase of the French text, and section 15 says this regulation replaces an older one on practice in a partnership or company, so older summaries may be out of date. Other provinces run their own regimes, so none of this carries over unchanged.

Control and voting interests must stay with practising accountants

Section 3 of the Regulation respecting the practice of the chartered professional accountancy profession within an organization (C-48.1, r. 16.1) applies where the organization presents itself as an organization of chartered professional accountants, or where one or more accountants in it offer assurance services. A CPA may practise there if effective control of the organization is exercised exclusively by CPAs from Quebec, another province or a territory who practise within it, and the organization meets minimum conditions. Effective control is defined as the real ability to direct the organization’s affairs and assets, whether through voting interests or by other means such as appointing directors or making major decisions. At all times, section 3 of the regulation requires a set share of the voting interests, which the regulation states, to be held by those practising CPAs, or by organizations whose voting interests are wholly held by them (directly or through further wholly held organizations), or by a combination of the two. In a section 3 organization, a buyer who is not such an accountant cannot be the majority holder.

The board, the chair and voting agreements

Holding the shares is only one test. Under the same section 3, a majority of the directors must be practising CPAs of the kind described above, and they must make up the majority of the board’s quorum at all times. At least one holder of a voting interest must be a Quebec CPA practising within the organization, or an organization wholly held by such persons. The chair of the board must hold a voting interest and be one of those practising CPAs. The regulation also says that only such a person may be given, by voting agreement or proxy, the exercise of a vote attached to an interest held by another such person or by a wholly held organization. A side agreement therefore cannot hand the vote to someone outside the group.

Other conditions for other organizations

Section 4 covers an organization not caught by section 3 in which CPAs offer compilation engagement services that are not intended exclusively for internal administration. There, effective control must be exercised exclusively by a wider list of persons, which includes CPAs, members of other professional orders, licensed real estate brokers, certain insurance and financial-planning certificate holders, registered securities dealers and advisers, and actuaries. The same pattern applies: more than half the voting interests, a majority of directors and a majority of the quorum. Section 5 says that in all other cases a CPA may practise in an organization if the conditions of Division II that apply to the CPA are met. Which section applies depends on how the firm presents itself and what services its CPAs offer, so a seller should confirm that with the Order rather than assume.

What the member must file with the Order

The accountant must make sure the section 3 or 4 conditions are written into the organization’s constituting documents, along with a statement that the organization is constituted principally to offer professional services. Before starting to practise within a section 3 or 4 organization, the accountant must complete the Order’s form with the information it requires and pay the prescribed fees. On request the accountant must give the Order any information or document needed to apply the regulation. Section 6 of the CPA organization regulation (C-48.1, r. 16.1) also requires the accountant, by 31 March each year, to report on the form any changes since the last information filed. Where several accountants practise in one organization, they may designate one of them to answer the Order; in a section 3 organization that person must hold a voting interest and be a director. The regulation also requires the accountant to provide and keep liability coverage for the organization, with further coverage required for section 3 and 4 organizations, subject to exclusions the regulation sets out.

When a member stops qualifying

Section 1 of the regulation says that if a condition is no longer met, the accountant must take the necessary steps to comply, failing which the accountant can no longer practise within that organization. Section 1 of the CPA organization regulation (C-48.1, r. 16.1) also requires the accountant to notify the Order in writing within 15 days, unless the problem has been remedied. Section 8 separately requires an accountant in a section 3 or 4 organization to notify the Order without delay of events such as cancelled liability coverage, striking off, dissolution, bankruptcy or liquidation, and of any change to the information filed that would contravene the section 3 or 4 conditions. A sale that quietly changes who holds the votes may therefore put the practice out of compliance.

• Ask which of sections 3, 4 and 5 of the regulation applies to the firm, and get that answer from the Order, not from the seller alone.
• Map every voting interest and holding company, and test each against the regulation’s wording on wholly held organizations that hold votes.
• Check whether any voting agreement or proxy gives a vote to someone who is not a practising accountant of the kind the regulation names.
• Confirm that the constituting documents still record the conditions and the professional purpose.
• Plan the filings to the Order, including the annual update due by 31 March, as part of the closing sequence, not afterwards.

Other professions have their own regulation

The Professional Code’s listing of regulations includes separate regulations on practice within a partnership or joint-stock company for other professions, such as architects, veterinary surgeons, the dental profession and notaries. Do not carry the accountants’ rules across to a different professional order. Every enterprise registered in Quebec’s enterprise register must also file an annual updating declaration, even with no changes. See can a non-professional own a practice for the wider question and selling an accounting practice for how a sale runs.