Physician Practice Guide: CPSO Compliance for Buying and Selling a Medical Clinic

By Hani Al-Dajane

Buying and selling a medical clinic is a complex but often rewarding transaction for physicians registered with the College of Physicians and Surgeons of Ontario (CPSO).

The potential benefits for physicians buying a medical clinic are securing a relatively guaranteed income, reducing operating costs, obtaining a stream of existing patients, securing experienced staff, and entering an existing lease. However, some possible drawbacks include struggling to fit in with the clinic’s culture, failing to comply with various regulatory requirements, and receiving a clinic that was different from what was expected.[1]

This guide summarizes some of the key regulatory and compliance information under applicable laws and CPSO policies that physicians need to know for purchasing a medical clinic.

Initial Due Diligence

The purchasing physician should review the key documents related to the management of the clinic with their legal team before drafting the final terms of the purchase agreement.

This due diligence period should involve a careful review of the seller’s documents related to the medical clinic including the following:

Incorporation documents (e.g., the Articles of Incorporation, Shareholder Agreements, and the Minute Book of the seller’s medicine professional corporation);
Cost-sharing agreements between the physicians operating the clinic;
Association or partnership agreements between physicians, suppliers, and other third parties;
Leases documents and lease extension agreements; and
Employment contracts of the clinic’s staff.[2]

Note that certain legal obligations for employees may exist under the Ontario Employment Standards Act, 2000. If the purchasing physician terminates any existing employees, they may have to pay severance of pay in lieu of notice.

Letter of Intent

Generally, the first stage of the process for buying a medical clinic involves negotiations between the buying and selling physicians, along with their layers and accountants, to agree upon the initial terms of the purchase agreement. These initial terms will be formalized in a Letter of Intent.

HealthForceOntario recommends that the selling physician provide the initial draft of the Letter of Intent with the following terms:

Onboarding dates and physician transition periods;
Contingency plans for patient care in the event of unforeseen or extraordinary scenarios;
The purchase price for the clinic and any payment conditions for the buyer; and
Details about any assets or capital goods included in the practice (e.g., medical supplies, equipment, exam beds, IT systems, and EMR).[3]

The purchaser should meet with all the physicians at the clinic before finalizing the Letter of Intent to grasp the clinic’s operations adequately.

Furthermore, an agreement governing the clinic may require unanimous consent from all the clinic’s physicians to authorize a sale.[4] Consent to sale terms may increase the costs of purchasing a clinic or even block the sale altogether.

It is crucial that physicians have their lawyers carefully review the terms of the Letter of Intent to ensure that any required consents are obtained as a condition for the purchase.

Transitionary Locum Physician

Purchasing a medical clinic sometimes involves the buying or selling physician acting as a locum physician (or locum tenens), in which they operate as a temporary substitute physician at the clinic.[5] Often, the purchaser physician may locum at the clinic to facilitate a smooth onboarding process.[6] The terms of this transition period are often formalized in a physician association agreement.

Physicians must apply to the Ontario Ministry of Health to locum at a clinic during the transition. Physicians can email the Ministry at primarycareinquiries@ontario.ca to request a fillable PDF form of the application to be returned by email.[7]

The Ministry must receive the completed and signed copies of forms before the locum physician’s start date. The maximum registration term for a locum physician is one year with an option to extend.[8]

Applying for a CPSO Independent Practice License

A CPSO certificate of registration authorising independent practice allows physicians in Ontario to engage in an independent, unsupervised medical practice in Ontario.[9] The requirements for this certificate are listed in sections 3, 3.1, and 3.2 of the Registration regulation (O. Reg. 865/93) under the Medicine Act, 1991.

If the purchaser is completing their residency program, they should apply for their certificate at least six weeks in advance to receive their license before they start practicing at the clinic.[10]

Incorporating a Medical Clinic

Professional Corporations

Section 3.1 of the Ontario Business Corporations Act (OBCA) allows the incorporation of professional corporations that hold a valid certificate of authorization. Professions named in Schedule 1 of the Regulated Health Professions Act, 1991 (RHPA), including the practice of medicine, may operate as a professional corporation. Certain special regulations govern professional corporations for health professions such as medicine and dentistry.

Professional corporations operating for the practice of medicine by physicians are known as “medicine professional corporations” or “physician corporations.” The Health Professional Corporations regulation (O. Reg. 665/05) (HPC Regulation) under the OBCA sets limitations on the corporate structure of medicine professional corporations.

Certificates of the Authorization

The CPSO allows a medicine professional corporation to practice medicine so long as it applies for a certificate of authorization from the CPSO. The application for a certificate must occur following incorporation.[11] If all the requirements are met, the processing time for a certificate of authorization is about two to three weeks.[12]

Applications for a certificate of authorization can be completed via the CPSO Member Portal for an application fee.[13] The CPSO also requires physicians to renew their certificate of authorization annually.[14]

Sometimes the purchase of a medical clinic results in an amalgamation between the buyer’s and seller’s medical professional corporations. For the CPSO, a medicine professional corporation ceases to exist as a separate entity upon amalgamation with another corporation, allowing the CPSO to revoke its certificate of authorization.[15] Physicians should notify the CPSO of an amalgamation on their CPSO Member Portal.

CPSO Notice and Disclosure Requirements

The CPSO requires that all physician shareholders of a medicine professional corporations be listed on the CPSO Member Portal, regardless of whether the physician holds voting or non-voting shares.[16]

Under the RHPA and the CPSO policies, medicine professional corporations must notify the CPSO of any changes in the composition of physician shareholders within 15 days of the shareholder change.[17] The CPSO does not require notice for the addition or removal of non-physician shareholders.[18] Physicians can update the list of their medicine professional corporation’s shareholders, directors, and officers on their CPSO Member Portal.[19]

Furthermore, the CPSO requires that physicians update the information on their CPSO Members Portal for any changes to their medical professional corporation’s practice address, registered office address, corporation name, or corporation number.[20]

Corporate Structure Limitations

Section 1 of the HPC Regulation defines a “physician corporation” as a health professional corporation with a valid certificate of authorization from the CPSO. Note that the HPC Regulation’s definition of “physician corporation” is identical to the CPSO’s use of the term “medicine professional corporation.”

Voting Shareholder Limitations

Section 2(1) of the HPC Regulation requires that all voting shares of a medicine professional corporation be owned, directly or indirectly, by a CPSO-registered physician. Consequently, any agreement or proxy that vests voting rights attached to a voting share of a person who is not a CPSO physician shareholder is void (HPC Regulation, s. 2(3)).

Non-Voting Shareholder Limitations

However, the HPC Regulation allows non-voting shares of a medicine professional corporation to be owned in one of the three following ways:

By a CPSO-registered physician;
By a family member of a voting physician shareholder; or
By one or more individuals as trustees in trust for one or more children of a voting physician shareholder who are minors and beneficiaries of the trust (HPC Regulation, s. 2(1)).

The HPC Regulation defines a “voting physician shareholder” as a member of the CPSO that owns voting shares of a medicine professional corporation. The CPSO deems a physician’s stepchildren, stepparents, and common law spouses as eligible family member shareholders of a medicine professional corporation.[21] However, parents-in-law are ineligible family member shareholders.

Trustee ownership of shares of a medical professional corporation may be allowed within strict limitations. The CPSO only allows trustee ownership of shares where the trustee owns non-voting shares in trust for one or more children of a voting physician shareholder, and where those children are minors and beneficiaries of the trust.[22]

The CPSO also prohibits holding companies from owning shares in a medical professional corporation.[23]

Unanimous Shareholder Agreements

Following the above requirements for voting and non-voting shareholders is essential to maintaining the validity of any unanimous shareholder agreements governing a medicine professional corporation. A unanimous shareholder agreement for a medicine professional corporation is void unless each voting shareholder is a CPSO member, and each non-voting shareholder falls into one of the three categories mentioned above (HPC Regulation, s 2(4)).

Moreover, section 2(6) of the HPC Regulation allows CPSO-registered shareholders party to a unanimous shareholder agreement to restrict the discretion or powers of the directors of the medicine professional corporation under the terms of the unanimous shareholder agreement.

Director Limitations

Section 2(2) of the HPC Regulation requires that all officers and directors of a medicine professional corporation also be shareholders who are members of the CPSO. Consequently, only CPSO-registered physicians can be officers or directors of a medicine professional corporation.

CPSO Requirements for Informing Patients

The CPSO Transitions in Care policy requires that physicians coordinate with other clinic team members to keep patients informed about who has primary responsibility for managing their care – often known as the patient’s “most responsible provider.”[24]

Physicians referring patients to another physician must communicate essential information to patients. During the referral process, the referring physician must communicate to patients their anticipated role in managing care during the transition, how patient care and follow-up may be managed, and the names of the persons who will manage patient care.[25] Physicians must also inform patients about any changes to their role during the referral process.

HelathForceOntario advises buying and selling physicians to work together to create consistent messaging for clinic staff to communicate to patients. Physicians should use various means to communicate with patients such as the following:

Posting a letter in the waiting room;
Advertising in a local newspaper;
Notifying patients in person when they are seen by the outgoing physician; and
Mailing a notice to all patients.[26]

Patient Medical Records

The CPSO Medical Records Management policy requires that all physicians have a written medical records custodian agreement if they practice in a setting with multiple contributors to a record-keeping system or are not the owner of the practice.[27]

Medical records custodian agreements must also comply with the Ontario Personal Health Information Protection Act, 2004.[28] These agreements should also contain information on the following items:

Custody and control of medical records, including upon termination of employment or the practice arrangement;
Privacy, security, storage, retention, and destruction of records; and
Procedures to ensure enduring physician and patient access to records.[29]

Seller Physician Resignation

If the selling physician is retiring from the practice of medicine, then the CPSO requires that they complete a resignation form.[30] Physicians can resign from CPSO membership by submitting a service request in their CPSO Member Portal.[31]

Retiring physicians must complete their service request before the CPSO renewal deadline to avoid suspension for non-renewal.[32] Once a physician resigns, their certificate of registration expires, and they must immediately cease all practice activities.

Avoiding Conflicts of Interest

The purchasing physician may enter into new arrangements with other non-physician parties upon the purchase of a medical clinic. However, certain arrangements are prohibited under conflict-of-interest regulations and CPSO policies.

Under the Medicine Act, 1991, and the CPSO Conflicts of Interest and Industry Relationships policy, physicians are prohibited from receiving any benefit, directly or indirectly, from a supplier to whom the physician refers patients/specimens or who supplies medical goods or services to the physician’s patients.[33] Under section 15 of O. Reg. 114/94 defines “supplier” as a person who either sells or otherwise supplies medical goods or services, or is registered or licensed under any legislation regulating a health profession.

Physicians are also barred from renting premises to or from a supplier, except where the rent is normal for the area and the amount of rent is not related to patient referrals to the landlord.

Furthermore, physicians are prohibited from ordering a diagnostic or therapeutic service to be performed at a facility in which they or their family have a proprietary interest. However, the exceptions to this are where the interest is disclosed in advance to the patient, or the facility is a publicly traded corporation and not owned or controlled by the physician or their family members.

Takeaways

Physician purchasers should work with their legal team to understand the details of the medical clinic they are interested in purchasing at the due diligence stage to customize the terms of the Letter of Intent.

Physicians must also abide by the corporate structure requirements for operating their medicine professional corporation. Additionally, physicians should take care to uphold the notice and medical records compliance requirements under the CPSO policies and applicable laws during the transaction. As buyers make arrangements for their new medical clinic, various conflicts of interest must also be avoided to ensure regulatory compliance.

Contact the legal team at Emerge Law to guide you in the corporate and regulatory aspects of buying or selling a medical clinic.

Thank you to Ephraim Barrera for his contribution to this article. The contents of this article are not to be construed as legal advice. Contact Emerge Law’s lawyers for legal assistance.

[1] Doctor Care, “Buying and Selling a Medical Practice in Ontario Webinar” (13 September 2021) < https://www.doctorcare.ca/mini-webinar-buying-selling-a-medical-practice-in-ontario/>.

[2] HealthForceOntario, “Taking over a Family Practice” (July 2019) < https://www.healthforceontario.ca/UserFiles/file/PracticeOntario/TiPS/TiPS-TOFP-EN.pdf>.

[3] HealthForceOntario, “Taking over a Family Practice” (July 2019) < https://www.healthforceontario.ca/UserFiles/file/PracticeOntario/TiPS/TiPS-TOFP-EN.pdf>.

[4] HealthForceOntario, “Taking over a Family Practice” (July 2019) < https://www.healthforceontario.ca/UserFiles/file/PracticeOntario/TiPS/TiPS-TOFP-EN.pdf>.

[5] MD Financial Management, “Locum Tenens: The Basics for Physicians” (2025) <https://invested.mdm.ca/locum-tenens-the-basics-for-physicians/>.

[6] HealthForceOntario, “Taking over a Family Practice” (July 2019) < https://www.healthforceontario.ca/UserFiles/file/PracticeOntario/TiPS/TiPS-TOFP-EN.pdf>.

[7] https://www.ontario.ca/document/ohip-infobulletins-2020/bulletin-11259-registering-locum-or-contract-physician-patient

[8] https://www.ontario.ca/document/ohip-infobulletins-2020/bulletin-11259-registering-locum-or-contract-physician-patient

[9] CPSO, “Requirements” (2025) <https://www.cpso.on.ca/Physicians/Registration/Requirements#:~:text=Independent%20Practice%20Certificate%20of%20Registration,an%20acceptable%20international%20medical%20school.>.

[10] HealthForceOntario, “Taking over a Family Practice” (July 2019) < https://www.healthforceontario.ca/UserFiles/file/PracticeOntario/TiPS/TiPS-TOFP-EN.pdf>.

[11] CPSO, “Incorporation Issuance and Renewal” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal>.

[12] CPSO, “Frequently Asked Questions about Incorporation” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal/Frequently-Asked-Questions-about-Incorporation>.

[13] CPSO, “Incorporation Issuance and Renewal” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal>.

[14] CPSO, “Incorporation Issuance and Renewal” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal>.

[15] CPSO, “Incorporation Issuance and Renewal” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal>.

[16] CPSO, “Frequently Asked Questions about Incorporation” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal/Frequently-Asked-Questions-about-Incorporation>.

[17] CPSO, “Incorporation Issuance and Renewal” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal>.

[18] CPSO, “Frequently Asked Questions about Incorporation” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal/Frequently-Asked-Questions-about-Incorporation>.

[19] CPSO, “Incorporation Issuance and Renewal” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal>.

[20] CPSO, “Incorporation Issuance and Renewal” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal>.

[21] CPSO, “Frequently Asked Questions about Incorporation” (2025) < https://www.cpso.on.ca/Physicians/Your-Practice/Registration-Renewals-and-Incorporation/Incorporation-Issuance-and-Renewal/Frequently-Asked-Questions-about-Incorporation>.