On June 24, 2018, amendments to the Professional Service Corporation Provisions (Chapter 2A) of the Michigan Business Corporations Act (BCA) will be in effect. In 2013, the Professional Service Corporation Act was incorporated into the body of the BCA as Chapter 2A, but was drafted in a way that created conflicting language between multiple provisions. According to Justin Klimko from the Corporate Laws Committee (Business Law Section), the main goal of amending Chapter 2A this year is to clarify that entities may be shareholders in Professional Corporations (PCs) if all of their owners are properly licensed. The amendments also clarify when individuals must sever their relationships with a PC.
The inconsistent language in Chapter 2A of the BCA created confusion as to whether entities may or may not be shareholders of PCs. Various sections were amended to address the discrepancies.
Under the previous language, PCs were prohibited from issuing shares “to anyone other than an individual who is licensed…” This language was inconsistent with other sections of Chapter 2A because it seemed to exclude entities. Thus, the new amendments resolve this contradiction by clarifying that a PC may issue shares to “an entity that is directly or beneficially owned only by persons that are licensed persons in 1 or more of the professional services provided by the professional corporation.” Furthermore, the amendments added to the definition of “licensed person” to allow the entity itself to be a licensed person if the entity is licensed to practice a professional service.