In the third of his series on buying a practice, Jon Drysdale considers the legal aspects of the purchase.
Once you’ve found a practice and presented a robust finance proposal, which has received the bank’s outline approval, you will need to consider the legal aspects of the purchase. Having found a finance-ready buyer, the vendor will want to formalise arrangements. At this stage you will need to instruct a solicitor to handle the transaction.
In my experience, due to the potential complexities of a dental practice purchase, you should instruct a dental solicitor. They will be well versed in complex areas such as the transfer of an NHS contract and have the knowledge to put the appropriate measures in place to protect you from outstanding pre-purchase clinical issues after you assume ownership.
I asked John Grant, a Director at Goodman Grant Solicitors, one of the country’s foremost law firms providing specialist legal services to the dental profession nationally, for a breakdown of the legal work typically required.
Purchasing a practice will be one of the most important transactions of a dentist’s life, it is therefore paramount to appreciate and understand the basics of the acquisition process. Key areas that purchasing dentists should be aware of are listed below:
The journey starts with the crucial step of due diligence. It is here that your solicitor will ensure the seller has everything in order, guaranteeing transparency of all practice information.
Typically, experienced dental lawyers will enquire about all aspects of the practice; reviewing accounts, maintenance arrangements, patient information, compliance licenses and, but certainly not least, NHS contract performance levels. An effective and comprehensive due diligence process is essential to protect the buyer and to ensure that if there are any issues these are identified before the buyer is legally bound to proceed with the purchase.
NHS Contract transfer
Only GDS contracts can be transferred using the partnership route. If the seller has a PDS contract this needs to be changed to a GDS contract and this is only permitted for general dental services so that, for example, PDS orthodontic contracts are not transferable without LAT (NHS – Local Area Team) consent, which these days will be a rare occurrence.
No approach should be made to the NHS without conferring with legal advisers.
The partnership route operates by the seller and buyer serving notice on the NHS of intended partnership in a prescribed form at least 28 days prior to completion. The NHS should confirm within that period that the existing contract is to continue in the same terms.
Provisions will be included in the sale and purchase agreement dealing with the partnership, and subsequent retirement of the seller, usually after the period of two months following completion.
If you are not already a Performer registered with the NHS then you should make appropriate arrangements for this as soon as possible.
If the practice you are acquiring is in a different local team area then you must determine whether you are eligible to practice in the new area, as each maintains different requirements. Do not contact the LAT yourself. Speak to your solicitor about this.
Capitation scheme transfer
If you are acquiring a practice with Denplan patients and you are not currently registered with Denplan, you should contact them as soon as possible to ensure that your registration is accepted and that the transfer of patients can proceed smoothly following completion.
Furthermore, if you are acquiring a Denplan practice it is essential that the practice sale agreement contains warranties that all patients were, when last seen, dentally fit and that all patients are correctly banded.
If there are Practice Plan, DPAS or other payment schemes operated at the practice, you should make enquiries of the organisation’s administration department to ascertain the formalities for transfer.
Care Quality Commission
Dental providers must be registered with the Care Quality Commission (CQC); it is a criminal and professional offence to own a practice without being registered with the CQC. This can be quite complex. However, with the right advice, this should not be a hindrance to the progression of your transaction.
Practice purchasers should, at an early stage in the process, submit an application for CQC registration, which should be accompanied by a Disclosure and Barring Service (DBS) check. The application is made online at https://cqc.disclosures.co.uk.
Contract exchange and completion
The final step on your journey to practice ownership. A completion date will not be established until the exchange of contracts. The whole process is likely to take several months before contracts are exchanged and, for NHS practices in particular, usually there is approximately five weeks between exchange and completion.
If you are currently an associate you will need to determine when to give notice to your principal. You should bear in mind that until contracts are exchanged there is no legally binding commitment by either party and no certainty that the transaction will proceed. As associates are often subject to restrictive covenants (binding out clauses), you must consider your own circumstances before giving notice. On completion, you should be in a position to own and work in the new practice.
NB: the information in this article is only a guide, it is not exhaustive.
For further information relating to the legal aspects of a practice purchase, contact John Grant on 0113 834 3705 or visit www.goodmangrant.co.uk
John Grant of Goodman Grant Lawyers for Dentists
For more information call John Grant on 0113 834 3705 or email [email protected]
A NASDAL and ASPD MEMBER