Alternative Practice Structures, and Effective Control of CPA Firms
As CPA firms explore new business models, investment opportunities and growth strategies an emerging trend is the increasing interest of private equity (PE) investors in accounting firms. Private equity investment has gained momentum in several jurisdictions, and interest in these structures is emerging in Canada.
Regulation 10-1 addresses situations where non-CPAs look to acquire effective control over a CPA firm through contractual, governance, economic or other business arrangements. For the purposes of Regulation 10-1, effective control includes the ability to direct a firm's affairs and assets or make significant decisions, whether directly or indirectly. These provisions of Regulation 10-1 reinforce the long-held principle that firms must remain controlled by CPAs who are subject to CPA Ontario's oversight and professional obligations.
Under the Chartered Professional Accountants of Ontario Act, 2017 (the Act) and CPA Ontario's registration requirements, firms must be wholly owned by CPA Ontario members.
As business models have evolved, some CPA firms have explored Alternative Practice Structures (APS) that separate certain business functions from the professional practice itself. In some APS models, a firm remains legally owned by CPAs while operational, administrative, technology, marketing, or management functions are provided through a separate entity under a management services agreement or similar contractual arrangement. In certain cases, those entities may be controlled by individuals or organizations that are not CPAs. Management services agreements, debt instruments and other contractual arrangements should be carefully assessed as they may affect governance, decision-making authority, or the firm's ability to meet its professional obligations.
Regulation 10-1 recognizes that compliance with ownership requirements alone may not be sufficient where other arrangements effectively transfer control or significant influence to non-CPAs. Legal ownership reflects who holds direct interests in a CPA firm. Effective control, however, may arise through governance arrangements, contractual rights, financial relationships, or other mechanisms that enable a party to direct or significantly influence important decisions.
To enhance transparency, CPA firms are required to disclose agreements and arrangements relevant to the assessment of effective control. In addition, a firm cannot qualify for registration if it is effectively controlled by non-CPAs.
These requirements help ensure that CPA firms cannot satisfy ownership requirements in form while entering into arrangements that, in substance, effectively transfer control to persons who are not subject to CPA Ontario's regulatory oversight. To support effective oversight, firms must also notify CPA Ontario of changes to information provided during the registration process, including changes relating to the firm’s structure, governance or control. Such notifications must be submitted at least 30 days before implementation, allowing the Registrar to assess whether proposed arrangements remain consistent with the firm's continued eligibility for registration. The regulatory framework also requires firms to consider whether existing arrangements may affect effective control and the firm's ability to meet its obligations under the Act, the CPA Code of Professional Conduct, and the CPA Ontario by-law and regulations.
Firms considering management services agreements, strategic partnerships, external investments or other business arrangements should carefully assess whether those arrangements could result in non-CPAs obtaining effective control over professional activities. This assessment extends beyond ownership percentages and includes consideration of governance rights, approval authorities, economic arrangements, contractual restrictions, and decision-making structures that may be relevant in determining whether effective control exists.
For some CPA firms, these requirements may warrant a review of existing governance and management arrangements to confirm ongoing compliance with CPA Ontario's regulatory framework.
For more information about Alternative Practice Structures or CPA firm registration requirements, please contact the Registrar’s Office.