Top 5 Need to Know’s When Buying a Dental Practice

Buying a Dental Practice
  1. Should you go Asset or Share Purchase?

When acquiring an existing dental practice, this will either be by way of an Asset Purchase or a Share Purchase. Both transactions look mostly the same but there are some key differences from a legal perspective and the type of acquisition better suited for you will vary depending on your circumstances.

An Asset Purchase will involve the purchase of some or all of the assets owned by a Seller. A Share Purchase will involve the acquisition of the existing company’s shares – so none of the assets, goodwill or equipment will change hands; they will still remain in the ownership of the Company, instead, the ownership of the Company changes.

Generally, an Asset Purchase favours a Buyer as, for the most part, the liabilities of the business before completion will remain with the Seller. In a Share Purchase, the Buyer will inherit the liabilities of the company. Although a good solicitor would carry out full due diligence checks and include any necessary warranties and indemnities, there are often caps, limitations and obligations associated with these indemnities.

  1. Property must do’s

Most buyers will acquire a business with a lease as opposed to purchasing the freehold, partly because most practices will usually be leasehold in nature, to begin with, but further, often, buyers will not have the capital or lending availability on completion to acquire the freehold in addition to the practice.

Regardless of the tenure, there are some fundamental elements that we advise Buyers undertake before completing a purchase:

  • Full Property Searches, some Buyers are happy to waive certain searches on the acquisition property, particularly when taking on a lease. However, these searches will provide useful information which a seller or a landlord may not be aware of themselves. This will also flag significant risks which could arise in the future after completion.
  • Building Survey, often, buyers will not carry out a formal building survey, particularly if they are using a lender who has carried out a valuation of the Property, as they assume that the lender will have identified any issues, however, this is not necessarily the case.

A valuation would only identify any significant issues which would be obvious to a value, whereas a building survey would provide a more detailed report of both items which current need repair or maintenance and items which may likely need repair or maintenance in the future.

Having a building survey offers a good opportunity to allocate the responsibility of these repairs and maintenance with the Seller prior to completion.

  1. What will happen to Employees?

When using an Asset Purchase route, it is important to remember that the existing employees engaged by a Seller on completion will usually transfer over to you under the TUPE regulations. Under the TUPE Regulations, any employees would transfer over to you on completion on the same terms as previously set out with the Seller.

This is important to check the terms of all employees before completion if you are intending to change any terms you must do so carefully and with the advice of an experienced employment solicitor to avoid any possible employment issues or even employment claims.

  1. Structure options – sole trader or incorporate?

In recent times, the NHS will not accept a corporate entity named on the NHS contract – this doesn’t necessarily mean you will have to acquire the entire business as a sole trader. When using the Asset Purchase route, options are available so that the NHS contract can be acquired under your personal name and the remainder of the business can be acquired under the name of your limited company.

The benefit to having the business held by a limited company is that you should benefit from the corporate veil. Save for the NHS contract when acquiring an NHS or mixed practice, any liabilities of the business will be the Company’s and not your personal liabilities.

The corporate veil offers a level of protection for shareholders and directors that a sole trader would not usually benefit from, in addition of course to possible tax benefits, which can be confirmed by a financial advisor.

  1. Should I use a specialist dental solicitor?

Dental practices are unique in nature; with the various regulatory expectations, employee and associate roles, NHS and Denplan contracts, there are a number of bespoke elements to the dental industry. Particularly when acquiring an NHS or mixed practice, there are very specific notices that need to be served and specific timeframes that need to be adhered to. Your solicitor will need to be familiar with how the NHS and CQC’s notices and confirmations work and when using a solicitor that has no experience with such matters, this could add months of delays onto a transaction if such timescales are missed.

Rudlings Solicitors are dental specialists, advising the dental sector on a whole variety of dental transactions for over 30 years. We are fully versed in the structure of dental transactions and have a breadth of experience with a range of practices. Each practice is different, and so it is important to know that your solicitor has both the experience of dealing with the dental sector on a day-to-day basis and the skills to be able to implement your best interests.

If you are looking to acquire a practice and have any queries or are looking to instruct a solicitor, please do get in touch with [ME/US] at kate.ford@rudlingsllp.co.uk or one of our experienced solicitors, who will be happy to have a discussion with you.

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