Bracing for sale - considerations for dentists selling their practice

Wilson Browne

1st September 2018

Legal Briefing

Wilson Browne

By Guy Zarins

Solicitor

Wilson Browne Solicitors

THERE are a number of matters that apply whether selling a dental practice or a business generally. As an example, a dental practice will be party to various contractual agreements that may require novating or terminating prior to completion. The practice usually employs staff for which certain TUPE obligations will require addressing. There are, however, other considerations that apply solely to the sale of dental practices.

Where dentists provide NHS services, the principal dentist at the practice will be party to a GDS (General Dental Services) Contract. The GDS contract has strict rules prohibiting its assignment and an industry standard process is therefore followed to transfer this contract to the buyer. This procedure can be complex with the numerous legal documents to be entered into and it is essential that specialist legal advice is taken.

The dental practice's CQC (Care Quality Commission) registration is another niche aspect that will need sorting out during the sale process. The process differs depending on whether the practice is being sold as a sole trader, partnership or limited company. This is another area where a legal specialist with experience in the CQC registration process is necessary to advise on the correct procedures.

It is quite usual for dental practices to be run as partnerships with each partner owning a pre-agreed share of the business and its assets. The rules governing the running of a dental partnership are typically contained in a partnership agreement. When a partner decides to sell their respective share, the current partnership agreement can be terminated and a new agreement entered into between the remaining partners and the new partner. Alternatively, the selling partner can enter into a 'deed of termination' in relation to the partnership agreement, and the new partner into a 'deed of adherence'. In any event, these options require the remaining partners to enter into a legally binding agreement with the proposed new partner. The outgoing partner should inform the other partners of the proposed sale to ensure they are happy with the proposed new partner, before appointing legal and accounting professionals to handle the sale.

In the dental sector in particular, it is not uncommon for the selling dentist to enter into a specialist dental services contract with the buyer, to work in the practice as an associate for a pre-agreed period of time following completion of the sale. There can be a number of reasons for this. The purchase price payable for the business for instance might be conditional on the financial performance of the practice and this gives the seller more control to ensure the financial targets are met. Also, the buyer may benefit from having the former owner of the practice around to show them the ropes. This can help alleviate a number of the 'teething problems' that often arise once a business has been acquired. Finally, many dental practice owners are attracted to the idea of 'phasing out' of the practice gradually, as opposed to relinquishing control instantly.

Given the number of specialist factors to address when selling a dental practice, it is essential to appoint a legal professional with experience in the dental sector to ensure that the key issues inherent in dental practices are dealt with appropriately.

If you need any advice contact our Specialist Team on 0800 088 6004.

Wilson Browne