Here, John Grant of Goodman Grant Solicitors discusses the ins and outs of selling an NHS dental contract…
Unfortunately, selling an NHS dental practice is not particularly straightforward – and there are number of pertinent considerations that must be taken into account before making the sale.
PDS or GDS?
Knowing what type of contract you have – either a Personal Dental Services (PDS) agreement or a General Dental Services (GDS) contract – is crucial to a successful sale. Unfortunately, PDS contracts, most commonly used by orthodontists, are notoriously difficult to transfer, since they depend entirely on the LATs somewhat unpredictable cooperation. However, dentists who have a PDS contract that is designated for general dental services can easily convert their contract to a more easily transferred GDS contract. The right to convert from one to the other is absolute and the LAT is not permitted to refuse the request.
However, while dentists have been selling their GDS contracts since 2006 without any difficulty, the actual transfer process is not as simple as many might imagine. In truth, the sale or disposition of a GDS Contract is specifically prohibited in the GDS regulations and in the provisions of the actual contracts themselves – which technically makes it impossible to sell an NHS contract in a conventional sense.
Fortunately, however, there are a number of provisions that make selling, or rather transferring, this type of contract possible. These provisions enable a principal dentist (or dentists) to introduce a new partner or partners into the practice. Again, the LAT must be notified – and they require a minimum of 28 days’ notice – but as long as the proposed partner is registered with the GDC, the LAT cannot refuse the request – although it would be fair to say that LATs are becoming more and more fond of introducing their own requirements before agreeing to issue a contract variation notice.
Once the new partner has then been added to the contract, the original partner – the seller – can retire, relinquishing their ownership over the contract and its goodwill. This will typically happen a couple of months after the sale of the practice has been completed. This method has been come to be known as “the Partnership Route” and has been successfully utilised to transfer ownership of NHS dental contracts for the last ten years.
The Partnership Route is only applicable for unincorporated practices and, if a practice has incorporated, then a principal wishes to sell they are obliged to take a slightly different approach. The way that most incorporated practices are sold, therefore, is through the sale of the shares of the limited company. The principal, in their capacity as shareholder, must sell their shares to the prospective buyer, thus giving them ownership over the company / practice assets. This will not change the legal status of the practice as contractor to the LAT, but will allow different principals to effectively transfer ownership of a practice.
With the majority of incorporated practices, a change of control clause will have been inserted into the NHS Contract by the LAT when the application to incorporate was given by the LAT. This allows the LAT to retain control over who is the contractor – and means that if a certain percentage of shares are transferred, the LAT will need to be informed and their permission obtained. It is advisable to pay close attention to the wording of these clauses, however, since they are known to vary wildly – and even include stipulations that make it harder to transfer shares.
Help from the experts
Whatever the nature of your contract, the best approach is to always to employ the skills of an experienced dental solicitor, such as those at Goodman Grant, who understand the many different intricacies of buying and selling an NHS contract.
For more information visit www.goodmangrant.co.uk or contact your nearest office:
London: 0203 114 3133
Leeds: 0113 834 3705
Liverpool: 0151 707 0090