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Legal Q & A's In the Dental Business - Part Two

Hewi Ma of Brabner Solicitors

In the second of her series of articles for GDPUK, Hewi Ma of Brabners Solicitors discusses common legal pitfalls in the business of Dentistry.

I’m buying a dental practice and the selling agent wants me to pay a deposit – is this normal?

This is becoming very much the norm for dental practice sales and purchases.

From a seller’s perspective, they want some added assurance that a buyer is committed at the outset. You will be asked to sign a deposit agreement and it’s important that you understand the terms. The usual deposit amount is usually 1-2% and it is usually held by the selling agent or the seller’s solicitor.

It’s really important to check that there are provisions which will enable you to get your money back eg.

  • - If you find something during the transaction which affects the value of the practice
  • - There is something wrong with the property
  • - Where completion is on the condition of CQC registration and you are unable to be registered

Deposit agreements vary – be on the lookout for other terms which might not be in your favour such as a requirement to pay the seller’s legal fees or where a landlord is involved, their fees.

Instructing an experienced solicitor is key as they will know what to look out for. Get in touch with Brabners to see how we can help you!

How long does it take to complete the sale of a practice? I have a holiday coming up and I want to get away!

How long is a piece of string! A transaction will progress as quick as the slowest party. The more parties involved (eg bank either lending money to the buyer or a seller’s mortgage outstanding, private capitation schemes, third party landlord’s etc), the more likely the transaction will take longer.

If the practice has an NHS contract, factor in a month when the parties are waiting for contract variations to be issued. Even where no notice period is stipulated by the NHS (eg where the contract is held in the name of two partners and they are adding the buyer to it), in practice, the NHS still require a month’s notice to put into effect any changes required to an NHS contract.

Also factor in the times required to register with the CQC. If you are registered with the GDC, it’s possible for you to use a DBS check so long as it is not more than 12 months old. In all other cases, you will need to obtain a CQC countersigned, enhanced DBS check which can take up to eight weeks.

You can only submit your CQC application form once you have your DBS check. Once received, the CQC team will process it and let you know whether your application has been validated – approximately 5 days from submission. Be warned! Any missing information or documents will mean the application is returned to you to correct before you submit again for the application to be processed. If the CQC are happy with the information, they will send you confirmation your application has been validated. This doesn’t mean you are registered! Your application will then be passed to the assessment team who may wish to interview you and any other applicants, perform a site visit or ask for any other supporting documents.

Generally, factor in around 12-14 weeks for your application to be processed.

On average, a dental practice sale/purchase will take on average 6 months.

Navigating a dental practice sale or purchase can be a minefield and it’s in nobody’s interest for them to drag along. Ensure your legal team has the experience to handle every aspect of your transaction from negotiating the sale to completing your CQC application.

Our experts at Brabners are here to help you every step of the way. Get in touch with a member of our team for more information.

I’ve just instructed my agent to put my practice on the market. They’ve said they will prepare Heads of Terms for the buyer to sign. What does this entail?

Congratulations! This is a very exciting time for you!.

The Heads of Terms are effectively the bare bones of the transaction which is then later fleshed out by the transactional documents prepared by your solicitor.

They are commercial terms which are negotiated at the outset but sets the tone of the transaction.

They vary across different types of transactions and look out for key terms such as:

  • - What is for sale? This can be the assets, goodwill, property. The shares or even part of the business. If in doubt, seek advice from your accountant and legal team.
  • - Deposit – if you are selling, your agent will often ask for a holding deposit from the buyer to show their commitment. The amount is often 1-3% of the sale price and in the exception of certain conditions – non-refundable.
  • - Deferred consideration – some of the sale price may be held back for a period of time (eg two years). Particularly where the buyer requires the seller to work as an associate following completion. A turnover target will be agreed between the parties and the deferred consideration paid out only if the target is reached. If the deferred consideration is to be paid over a number of years, it is worth negotiating with the buyer that any over-performance can be carried forward into the next year. Similarly, if there has been an underperformance, most byers will accept a £1.00 for £1.00 reduction on the deferred consideration.
  • - Restrictive covenants – these are your anti-compete clauses. Again, negotiate the best terms for you. If you intend to retire following completion, they very much become a moot point.
  • - Payment of fees – in the event that one party withdraws from the transaction, check to see if there is a duty to pay the others’ fees and if this is reciprocal.

Ultimately, Heads of Terms are of a commercial nature – there is no set rules. It is whatever a seller and buyer are prepared to accept. However, an experienced dental legal specialist will be able to guide you on what is reasonable and generally accepted where a non-specialist will not.

The dental team at Brabners are here to help – get in touch today!

If you have any queries regarding the above article or would like to submit your own question, please contact Hewi Ma at Brabners by:

Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

Tel: 0113 5185072

Mob: 07901166026

Web: https://www.brabners.com/sectors/healthcare-law/dental

This article contains a general overview of information only. It does not constitute, and should not be relied upon as, legal advice. You should consult a suitably qualified lawyer on any specific legal problem or matter.

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