Dental Practice Sales – the top five most common problems
Dentistry is all we do. As such, when selling a dental practice, we often see the same issues arising which can slow down the progress of the intended sale. Time spent before sale in correcting these issues is time well spent.
So, in ascending order of importance and frequency, we set out the five key issues we see:
1 – CQC
If you have owned your dental practice for a long time your ownership structure may well have changed over time. It is common to see practices where the CQC registration has not kept up with those changes. Amongst the issues we see are the following:
- The CQC registration is still held by the practice principal(s) personally when the business has been transferred to a limited company. If the sellers wish to sell that limited company to the incoming buyer, a new limited company CQC registration is required which can cause delay;
- The CQC registration does not match the ownership of the NHS Contract in the practice. This could be because partners have been added to the NHS Contact but not the CQC registration and vice versa. For the purposes of transferring the NHS Contract as a part of the sale often corrective applications are required to ensure the CQC registration matches the NHS Contract.
Therefore, taking time pre-sale to ensure the correct CQC registration is in place will sale a lot of time later.
2 – Staff Contracts
It is still surprisingly common to see both employees and self-employed persons without either any written contracts in place at all, or if one is in place, it is considerably out of date. As far as employees are concerned there is a legal obligation to have an up to date written Statement of Terms in place. However, the incoming buyer also wants certainty as to the terms upon which all staff are engaged – particularly for key associates in the practice. Hence please ensure there are up to date written contracts in place for all staff members.
3 – Property Matters
As a property owner or tenant there are certain on-going compliance and regulatory matters that have to be met and complied with on an ongoing basis. We often see certain matters either not in place at all or out of date. These include:
- An Electrical Installation Condition Report (EICR)
This is a formal safety check of the circuitry and distribution boards within the premises. Although there is no specific piece of legislation that requires a report within mandated timelines, it is recommended that to ensure compliance with regulations such as the Electricity at Work Regulations 1989 that dental practices have a report every five years. As such, if you are about to market your practice, check the date on your last report and it if has expired or is about to, then consider an updated inspection.
- Fire Risk Assessment
The Regulatory Reform (Fire Safety) Order 2005 requires a suitable and sufficient fire risk assessment to be in place to identify the risk of fire to people in the premises, establish the measures necessary to protect people and reduce the chance of a fire starting and make sure people evacuate safely if a fire happens. Whilst there is no requirement for an external assessor to do the assessment, the lenders supporting a buyer often need to see a third-party assessment of the premises. As such you may want to consider obtaining an expert assessment. Also please bear in mind that the assessment must be reviewed regularly.
- Asbestos
Under the Control of Asbestos Regulations 2012, the person designated as “duty holder” has a legal obligation to manage asbestos risks in non-domestic premises. For premises built or refurbished before 2000 you should arrange an inspection or survey to locate whether asbestos is present. Whilst again there is no specific requirement to have that survey undertaken by an outside agency, are you personally sufficiently able to identify asbestos? If not, you should obtain an inspection from a suitably qualified expert to check for asbestos and if it is present establish a management plan. That can take time in the context of a practice sale so if it can be done in advance this is sound pre-sale preparation.
4 – NHS Contracts
It sounds a basic question, but if you have a GDS or PDS Contract in the practice do you have an actual copy of it? Despite popular opinion to the contrary no NHS contract is exactly the same. The buyer’s representatives will want to see a full copy of the under-lying contract so steps to locate it now will save time later – including requesting one from NHS England if all else fails.
The buyer will also want to see the history of Contract Variations to ensure they have a complete understanding of all current terms.
5 – Flawed Incorporations
If you currently trade as a limited company, you may have transferred the practice into the limited company from the former sole trader or partnership ownership. If so, it is common to see situations where key contracts and assets remain in the sole trader/partnership name without having been properly transferred to the new owning company. This can include staff contracts and key contracts of supply remaining in the personal names of the principals. The buyer will want to see (not surprisingly) a clean limited company which contains all the assets and contacts of the practice. Therefore, undertaking a pre-sale audit of contracts is time well spent.
Dental practice sales are prone to take a long time to get to completion even where the seller is well organised. Any of the above issues can severely de-rail the progress of a sale.
We are always happy to have a free initial no-obligation call to discuss how you can take action in advance to maximise the chances of a smooth sale.
Contact Stephen Knowles on 01904 521270 or Stephen@pfmlegal.co.uk.
