North Carolina Just Removed a Major Hurdle for DSO Deals

North Carolina has eliminated the requirement that dental service organizations (DSOs) submit management arrangements to the North Carolina State Board of Dental Examiners for review and approval before executing them. The change arrived through Section 38A.2 of Session Law 2026-41 and took effect July 7, 2026.

For years, North Carolina was one of the few states that required advance board sign-off on management agreements. If you operate a DSO in the state, are considering an affiliation, or are in the middle of a practice transaction, here is what changed and what did not.

What Changed

Under the prior framework, the Board's Management Arrangement Rule (21 NCAC 16X .0101) required both the DSO and the dentist-owner of the affiliated practice to submit their management agreement to the Board for review and approval before signing. In recent years the Board also asked for the broader transaction documents connected to a proposed affiliation.

That process added months to deal timelines, raised transaction costs, and often created uncertainty for parties unfamiliar with the state's approach.

Section 38A.2 now provides that management arrangements may be executed without pre-approval, approval, a determination of compliance, or review by the Board. The Board can no longer condition the validity or enforceability of a management arrangement on its prior consent, and it can no longer require a deemed compliance letter as a precondition to closing.

The provision applies to management arrangements executed, modified, or renewed on or after July 7, 2026.

What Did Not Change

The pre-approval gate is gone, but the compliance framework behind it remains.

The Board retains enforcement authority. It may still review management arrangement documents in the ordinary course of an investigation triggered by a valid complaint, and it may proceed under G.S. 90-40.1 for alleged violations of the Dental Practice Act.

Written agreement requirements remain. Every management arrangement must still be memorialized in a written agreement that:

• Is signed by all parties

• Sets forth all material terms

• Describes all services the DSO will provide and the time periods during which it will provide them

• States aggregate compensation or a precise methodology for calculating it

  
  

Long-standing Board prohibitions and guidelines remain. The new law does not on its face eliminate the prohibition on succession agreements, the ban on percentage-based management fees, or the Board's guidance on the acquisition of dental practice assets. Restrictions on management company control over clinical decisions, hiring and firing of clinical personnel, patient records, and practice revenue streams also stay in place.

In short, the substantive rules that made North Carolina management agreements distinctive are still on the books. What disappeared is the requirement to prove compliance to the Board before you sign.

The Rulemaking to Watch

The act directs the Board to adopt a permanent rule amending the Management Arrangement Rule so that it is substantively identical to the new statutory language. That rulemaking is exempt from the usual legislative review process, and the statutory provisions sunset once the permanent rules take effect.

Anyone operating in the state should track that rulemaking closely to confirm the conforming rules do not introduce requirements beyond what the statute contains.

For Practice Owners

If you are a North Carolina dentist considering a DSO affiliation or a sale to a DSO-backed buyer, the practical effect is speed. You are no longer waiting on a Board queue to move forward.

The tradeoff is that the risk has shifted to you and your counsel. The Board used to function, in effect, as a free compliance check before signing. That check is gone. A structurally defective agreement can now be executed, operated under for years, and surface as a problem only when a complaint lands.

Questions worth asking before you sign:

• Is the management fee structured in a way that survives the percentage-fee prohibition?

• Does the agreement give the DSO any control over clinical decisions, clinical hiring, or patient records?

• Does the deal include a succession arrangement that the Board has historically treated as impermissible?

• Does the written agreement satisfy all four statutory content requirements?

  
  

For DSOs and Groups

If you have been holding transactions in North Carolina because of Board timelines, those transactions can move now. A few steps to take:

Pull Board pre-approval out of your deal mechanics. Closing conditions, regulatory milestones, and diligence checklists in pending North Carolina transactions should be updated.

Review your agreement templates. Confirm that your standard management services agreement meets the four written-agreement requirements and does not rely on structures the Board has previously rejected.

Build compliance review in-house. The Board is no longer reviewing your documents in advance, which means the diligence it used to perform is now yours to perform. Enforcement risk did not go away, it moved downstream.

Does This Cut Against the National Trend?

It does. Most of the regulatory movement over the past two years has run in the opposite direction, toward more oversight of management arrangements rather than less.

Colorado's Dental Board recently adopted new regulations that explicitly restrict what DSOs can do in the state, effective January 1, 2027. California enacted SB 351 to tighten limits on non-clinical control of practices, and its Attorney General reached a $2 million settlement with Aspen Dental Management over alleged corporate practice violations.

North Carolina's move is a genuine outlier, and it is worth reading precisely. The state deregulated the process, not the substance. The corporate practice of dentistry framework, the fee restrictions, and the Board's investigative authority all remain. Treating the change as broader permission than it is would be a costly misread.

Marti Law Group advises dental practice owners, buyers, sellers, DSOs, and dental groups on practice transactions and regulatory compliance. If you have questions about how North Carolina's new law affects a pending transaction or an existing management arrangement, contact our team.