Avoiding the pitfalls of dental practice sales – John Grant – Goodman Grant

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  Posted by: Dental Design      14th September 2019

John Grant discusses some common mistakes that are made when you fail to consult a specialist solicitor with regard to buying or selling a dental practice.

At present, we are dealing with a complex case where a buyer is seeking to purchase 50% of an expense share for a dental practice through a limited company. The practice is currently owned by expense sharers – one of whom is a sole trader, while the other is a limited company. The NHS contract – which is a PDS agreement – is in the joint names of one expense sharer, but also a previous expense sharer who sold the practice to them as a company. Additionally, the CQC registration is only in the name of the limited company, with no mention at all of the other expense sharer. This situation is a mess, particularly for the buyer, but it also has significant risks for the current practice owners.

It appears as though the previous practice owners either had no specialist dental advice or guidance provided to them at any time, or those who acted on behalf of the limited company were – quite frankly – negligent. The expense sharer that the buyer is looking to purchase the practice from is, in fact, trading unlawfully at the moment, as they are not registered at all with the CQC. We have to put forward applications on behalf of the buyer to have the NHS contract transferred to the right names. However, if it comes into contention with the LAT that one of the current expense sharers is not CQC registered, then this could potentially jeopardise the NHS contract.   

Moreover, nobody had previously considered that with a GDS contract, another dentist could enter into a partnership, which would enable individuals to retire. There is no equivalent to this in a PDS agreement, so the transfer of this contract is entirely in the hands of the LAT. A request can be put forward to the LAT to transfer the contract from PDS to GDS, but at the moment the practice is getting more than the average per UDA. As such, the LAT is likely to want this reduced and three months’ notice must be given to do so. When the previous expense sharer bought into the practice, nobody bothered to check their position with the CQC. Furthermore, nothing had been done with the NHS contract, which is why it is still partially in the name of the previous expense sharer who sold to the limited company.

The buyer now has to foot additional costs in order to address and resolve these problems properly. Unfortunately, we do come across these issues not infrequently, with the reason for this being that dental practice buyers and sellers often instruct non-dental specialist solicitors who might offer cheaper services, but do not necessarily have the relevant expertise to provide reliable dento-legal support. The same applies for non-dental specialist accountants advising clients on incorporating a practice and failing to appreciate that this involves changing the CQC registration, and – if there is one – applying to have the NHS contract also transferred to the limited company, among other things. This emphasises the importance of seeking legal representation from a firm who has an extensive knowledge of the dental sector and understands both NHS and CQC regulations.

At the moment, there are problems arising between the CQC and the LAT agreeing to transfer an NHS contract. This is an issue that a non-dental specific law firm may not be aware of if they are unfamiliar with buying or selling dental practices. As such, a buyer could reach transaction completion, before the LAT suddenly decides not to transfer the NHS contract. Consequently, the purchasing process is delayed and costs go up. In addition, the buyer might have given up an associate position and would be temporarily put out of work, while the seller may have booked to go on holiday. The whole purchase process can ultimately become a real challenge.

A smooth transaction when buying a dental practice is achievable so long as you make some key considerations. Where an NHS contract is involved, check whose name is on the contract, and obtain confirmation that the practice has been and is continuing to perform according to this agreement. You should make sure that the CQC registration is correct and check the CQC report. It is also essential to be patient. Don’t be in a rush to buy or sell a dental practice, otherwise important details could be overlooked that can delay the transaction, result in additional legal costs, or give rise to other potential liabilities.

Anything is easy if you know how. As current Chairman of the Association of Specialist Providers to Dentists (ASPD), John Grant has been advising dentists on all the legal aspects of running a practice for almost 30 years. He works alongside Ray Goodman to spearhead the Goodman Grant team of dento-legal solicitors, offering a wide range of services to ensure the process of buying or selling a dental practice is straight-forward. They can provide trusted advice and guidance to help you avoid the potential pitfalls of a transaction.

John Grant of Goodman Grant Solicitors – contact jmg@goodmangrant.co.uk

For more information, visit www.goodmangrant.co.ukor contact your nearest office:

London: 0203 114 2133

Leeds: 0113 834 3705

Liverpool: 0151 707 0090

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