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Advicesheet

Buying and selling a practice

A2

Advicesheet

Buying and selling a practice

A2

contents
Most dentists aspire to owning their own practice and there are two options generally available for aspiring practice owners: buy or buy into an existing practice or set up a squat practice. This advice sheet deals with the factors involved in the buying and selling of dental practices, whilst the BDA's advice sheet A18 concentrates on setting up new practices.
What is a dental practice? Choice of area Finance The need for written agreements Valuation of tangible assets Valuation of goodwill NHS contracts Selling goodwill on its own Goodwill when leaving or buying into a partnership Increasing goodwill value Capital Gains Tax Staff Practices with associates Informing patients Selling a practice after a death Advice Sale and purchase agreement - guide to clauses

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BDA February 2007

Buying or selling a dental practice can be a complex process and include factors such as property, goodwill, staff, equipment, stock, associate/performer agreements and capital gains tax, involving a range of professional advisers, including accountants, solicitors, financiers and valuation agencies. While every practice purchase or sale is unique and generalisations can be risky, this advice sheet provides a starting point for buying and selling a practice, including outlining basic principles and identifying additional sources of information.

The first question to be addressed is what exactly is being sold or bought. The most significant part of a practice sale is normally the premises from which the business is run. This means that the property valuations and lease renewal prospects have to be looked at carefully, as well as agreements for any sublet parts of the building. Equipment and stocks also have to be objectively valued. But just as important are valuations of intangible assets such as goodwill. Where a business is sold as a going concern it often has a value over and above the sum of its premises and equipment. This is the goodwill of patients who return to the practice for treatment time after time, the loyalty and effort of staff members and the reputation of the business. Patients will need to be informed of the practice changing hands both before and after the sale and clear and watertight agreements must be reached on how this will be done. The staff should be considered and in particular whether they will continue to work in the practice or be offered redundancy. There may be associates, assistants and VDPs whose future work intentions have to be determined, as do the future plans of the vendor. The sale or purchase will entail negotiations on a range of issues, and the objective is a price which both purchaser and seller can regard as fair, even if for different reasons. For example, a seller might regard his equipment as almost 'given away' but see a good deal on the valuation of goodwill. And the purchaser might feel they are paying 'under the odds' on goodwill, but regard the equipment and stocks price as expensive. The agreement does not have to be entirely satisfactory so long as buyer and seller are generally content.

What is a dental practice?


Goodwill

What is most important from the buyer's point of view is that the practice is a sound commercial concern. You should undertake careful market research before deciding to purchase a practice - just because a practice is for sale does not mean that it is necessarily a good business prospect. So the basic advice for every buyer is to get as much information as you can about whether the area where you are planning to practise needs you. Talk to the members of the Local Dental Committee (LDC), the local Primary Care Organisation (PCO) and to other GDPs. Go to local BDA meetings and talk to colleagues. Check up on all the available statistics that allow you to compare prospects in one area with those in another. Take into account transport links with the proposed site (for instance bus routes or car parking), local competition, the make-up of the local population, unemployment rates, number of children and cultural and ethnic groups, all of which may influence whether you can offer something different. It is also prudent to gather available information about the nature of the community in the future, such as planned changes to the infrastructure, housing developments and population trends. The local authority can help with this.

Choice of area

BDA February 2007

Finance

Study the accounts over the past few years to ensure there are no discrepancies and everything is in order. If you do not understand accounts, get someone with accounting experience to check them for you and also to teach you about accounting processes, as you will need to understand them in the long run to be able to run the business effectively. You may need to borrow money to buy the practice. Should large amounts of money need to be borrowed, you must ensure that you prepare your case properly. Banks and other potential lenders may well ask for a business plan to be produced, and so you must be prepared for this eventuality. The potential lender may give you a model business plan, including cashflow charts. This also helps you to research the potential lender: their material will tell you what information they are looking for and the way they want it presented. The BDA's advice sheets C3: Business planning and C6: Financial management in general dental practice provide information on preparing a business plan and financial management.

Borrowing

The need for written agreements

Buyers or sellers should always consult their individual solicitors and draw up formal written agreements. Since every sale will be different it is impossible to draw up a 'model' sale of practice agreement but there are suggested clauses at the end of this advice sheet. Many solicitors will have dealt with conveying property and businesses but some specific issues that you may need to address with your solicitor are binding out, workin-progress (WIP) and failed treatments.

Binding out

A buyer needs to make enquiries about a seller's future work intentions since they largely determine the value of the goodwill and it is here that disputes can easily arise. It is advisable for the agreement to contain a binding out clause that will restrict the seller's ability to work in the area for an agreed period. The standard binding out radius will vary from area to area, depending on the housing density. Sometimes a binding-out clause may not be required, but instead a binding-in clause, whereby the vendor agrees to stay on at the practice for a certain period as an associate, to assist the buyer in the running of the practice.

Work in progress

NHS work There should be no NHS WIP when a practice is sold on, as all courses of treatment should have been completed. The PCO will make a calculation to ensure that the right amount of money has been paid for the UDAs completed, on a pro-rated basis. If there are any incomplete courses of treatment when the practice is sold on, in England and Wales the cases can either go to the PCO to arrange for their completion or the incoming practice owner may agree with the PCO that they will complete the cases. The rules regarding incomplete treatment must be followed. Private work If there is any private work that has still to be finished when the practice changes owners, then agreement needs to be made between the seller and the buyer on the monetary value of the work done and the amount of money collected thus far for the treatment and apportioned appropriately.

BDA February 2007

When a dentist buys a practice, it has become customary to keep back a proportion of the sale price for failed treatments carried out by the previous owner that will have to be redone at no charge to the patient. By doing this, the incoming dentist will not be disadvantaged by work that the previous owner has profited on but needs to be repaired for whatever reason. Free NHS repair and replacement treatment rules do not apply to treatment undertaken by one contractor that is repaired or replaced by another. After six months, the remainder of the money should be paid over to the seller of the practice, along with details of redone treatments and time taken (which must be reasonable). An agreed hourly rate should be written into the contract for the rework.

Failed treatments

The property is a major part of the business, with the practice premises generally either owned or leased by the seller. Both parties need to be sure what property rights are being handed over to the buyer and agree an appropriate value for them. Property valuation requires advice from local valuers and buyer and seller can either agree to accept a single independent valuation, which is less complicated and cheaper, or each obtain independent valuations and negotiate their own price based on these. The buyer will probably want to take into account possible plans for expansion later and local guidance from valuers on planning rules will be needed. The laws relating to planning and the development of premises are complicated and buyers must carefully consider their long-term intentions for the practice so that comprehensive advice can be obtained from the valuer. A full structural survey should also be commissioned by the buyer to ensure that there are no problems with the building. Turning to leases, the remaining length of the lease, the security of tenure, the prospects for renewal and the tenant's responsibilities are important considerations. If the lease being transferred has only a short time to run and is not renewable, the value will be severely reduced. But if the buyer has long enough to become established, say 24 months or more, then the practice ought to be able to transfer to new premises later without much loss of patients, although an NHS contract in England and Wales will not be transferred without the PCO's agreement. Legal advice must be obtained on the wording of a lease, prior to agreeing a purchase. While much of a goodwill valuation is attached to location and premises, a practice purchase or sale does not have to involve the premises. Sometimes a buyer may be buying a practice (the goodwill, the stock and staff) and move it to other premises. Alternatively, the seller may wish to retain an income by keeping the property and leasing it to the buyer. This is often helpful for the buyer, too, who might find the purchase prohibitively expensive if it initially includes the premises. An option can always be put into the sale contract for the buyer to buy the premises at a later date. Machinery and equipment are usually appraised at their depreciated cost, as per the practice accounts. The value of equipment falls over its working life and so you should consider the initial cost of the equipment and the amount of time until it will need replacing. It is useful to have an inventory of equipment. Stock should be considered against cost, resale price, prospective sales and quantity of goods in stock. Valuation of equipment and stocks can also be undertaken independently and, as a general principle, the more independent views which can be brought into the practice sale negotiation, the better the chance of a fair outcome. Dental supply houses will look at dental equipment and consumables (not general fixtures or other equipment), charging a fee, which depends on distance travelled, number of surgeries, and whether the person seeking the valuation is a long-standing customer.
BDA February 2007

Valuation of tangible assets


Property valuation

Leases

Equipment and stock

Valuation of goodwill

Goodwill is an intangible asset, its value influenced by a wide range of factors, some local and some generic. The viewpoint of a seller can differ from that of a prospective buyer and in some cases it can be very difficult to reconcile the two. Accountants or solicitors can cope with all the other questions associated with the sale of a practice but goodwill valuation requires particular care. There are no hard and fast rules for arriving at a valuation of goodwill - rather it is a process of identifying and assessing as objectively as possible a number of influences. The main factors influencing the value of goodwill are listed below and although not exhaustive or in order of importance they should give a starting point for negotiation: Turnover: What are the gross annual takings of the practice? Profitability: What are the profit levels and practice expenses? Continuance of NHS contract: In England and Wales, the PCO can decide whether or not to recontract with the new owner and on what terms. If they decide not to do so the practice will not be able to provide NHS care in the future, which will affect its goodwill Trends in turnover and profitability: It is important to identify any trends over the previous three to five years in terms of turnover and profitability, along with any reasons for fluctuations. The properly certified accounts are important for looking into gross receipts, profitability and recent trends. Using recent payment schedules or even the appointment book is not enough although it can be helpful to look at all practice records over several years in conjunction with the certified practice accounts Premises and establishment date: How long have the premises been a dental surgery? How long has the current seller owned the practice? If the owner is retiring, has the practice turned the corner from being well established to becoming run-down and tired? Practice amenities: Look at the overall condition of the practice and facilities. Do practice staff work as a strong team? Consider the influence of well-liked staff Services offered: What is the type and range of treatment undertaken? For example, does the practice offer orthodontics or cosmetic treatment? Size of practice: How many patients and surgeries are there? Is there any space to expand? Patient numbers/characteristics: The ideal is a core of regulars plus a flow of new patients. Not only should you look at patient numbers, but also what type of patients are they (NHS, private or members of a capitation scheme). Do they attend when in pain or regularly? Do they have high treatment needs? Associates: A large proportion of practice receipts may have been built up by associates or, possibly, assistants. It is important to establish their future plans Area: Think about the type and characteristics of the locality. Is it industrial, commercial or residential? Are there potential new patients in the area? Competitors: What is the dentist/population ratio? How many other practices are there in the area? Are there premises in the area that new competitors could readily set up in? There may be a number of practices nearby but not offering the same services as the practice being sold - it may be a specialist practice, for example, or a largely private practice surrounded by NHS practices Seller's plans: Why is the seller disposing of the practice? What do they plan to do? These are very important questions - sellers may own other practices that they are retaining and patients may therefore move to their new practice, reducing the goodwill Buyer's background: Has the prospective purchaser previously worked at the practice as an associate or assistant? If so, they may have a claim to some of the goodwill of the practice and this will reduce the valuation of goodwill to be bought.

BDA February 2007

There are several ways of reaching an assessment of the value of goodwill in the light of these factors, and advice can differ. This is an area where expert guidance and professional review of the practice's financial position is essential. You can seek professional advice from a dental trading firm with a specialist valuation department, or from financial advisers or firms of surveyors and valuers who advertise regularly in the British Dental Journal. Such people normally have wide experience in valuing practices and will be able to take account of the local and other factors involved. A list of specialist agencies is available from the BDA's Business Team.

With the introduction of the new NHS contracts in England and Wales, it is not guaranteed that the buyer of the practice is going to be able to secure the same NHS contract as the vendor, or even a contract at all. Once a contract is broken (for instance by a practice being sold) it gives the PCO an opportunity to redistribute their resources to best meet the dental needs of the population at large. This means that if they decide to give the incoming dentist a contract, the terms may not be the same and they may have to do more UDAs for the same amount of money or be given a reduced contract value. Therefore, as soon as a vendor knows who the buyer is, they should approach the PCO with the potential new owner's credentials and try to secure the same contract for the buyer, as this will increase the goodwill value for the vendor and secure a monthly income for the buyer. There are other variations to this, using partnerships or companies, but these should not be considered without taking professional advice. For further information on these schemes, please contact the BDA's Business Team.

NHS contracts

Goodwill can be sold on its own. For example, in the case of a retiring practitioner whose practice was run from his home and who does not want to move house, there is a price to be paid for the patient records and a letter from the retiring dentist to regular patients telling them of the new practice arrangements. But because the patients will no longer be able to attend at the same premises, the value of goodwill may be significantly reduced. It is also essential to check carefully the nature of goodwill in these circumstances and to look at the type and amount of treatment carried out, along with the age range of the patients.

Selling goodwill on its own

The principles for valuing the goodwill within a partnership are the same as for a singlehanded practice, except the total value must be divided according to the shares of the partners. For example, if a practitioner is buying into a partnership with three existing partners and it is intended that all four will have equal shares, the new partner will be buying 25% of the goodwill. If the total goodwill is valued at 60,000, the cost to the new partner of purchasing their share of the goodwill will be 15,000. However, with partnerships there may be other complicating circumstances - for example the ownership of the building. It is therefore essential that these issues are understood and that the new partner enters a proper partnership deed with the existing partners.

Goodwill when leaving or buying into a partnership

BDA February 2007

Increasing goodwill value

Goodwill can be enhanced by Redecorating the better the appearance of the practice, the higher the goodwill value as it becomes more attractive Ensuring records are up-to-date and in good order. If the records (both dental and business records) are not in good order, it will give impression of poorly-run practice and thus a reduced goodwill value Making sure profits are maximised and appointment books are full Resolving any outstanding issues within the practice Talking to the PCO about transferring the NHS contract to the new owner - if they will transfer the contract, especially without a change in the terms, then this can have a significant impact on the goodwill value If premises are leased, ensuring there is a good period left on the lease or extending it so that new owner will have security for the practice.

Capital Gains Tax

The sale of a dental practice may involve liability to pay Capital Gains Tax (CGT) on the proceeds. CGT becomes payable whenever a profit (a 'capital gain') is made on the sale of property. The precise way in which the profit is calculated can be extremely complex and so you will require professional advice in order to assess your potential liability. For an overview of how gains are calculated, please see the BDA's Advice Note 26. It also discusses rules that cover deferring payment if the proceeds are reinvested in another business or property which may be advantageous for vendors. It is highly recommended to seek advice on CGT before selling your practice as it may be possible to structure it in a tax advantageous way.

Staff

The position of the practice's staff needs careful consideration, since employment legislation protects them on the sale of a business (Transfer of Undertakings (Protection of Employment) Regulations (TUPE)). There are certain conditions but, in essence, employees who have worked at a practice for more than one year cannot be dismissed. It is not enough for the buyer to say that they do not like a particular member of staff - they are considered part of the business. The terms and conditions in the employment contracts of staff transfer to the new owner. Sellers should ensure that the contracts and job descriptions of staff are up-todate and buyers need to ask to see these documents. The seller must follow a set procedure and must give the new owner an Employee Liability statement. Further information is contained in advice note 20 mentioned below. It may be possible for the new owner to make alterations to working practices but you need to be clear about what changes you want to introduce. Under the regulations, you should have an 'economic, technical or organisational reason' for proposed changes, which should be discussed with staff and their views sought. Even if the staff do not agree to the changes, it may still be possible to implement them, but every effort should first be made to train staff in any new working practices. For further information on TUPE, download the BDA's advice note 20: Transfer of Undertakings from www.bda.org or contact BDA Practice Support. Remember that good staff are valuable assets and will help a purchaser to retain the practice's patients.

BDA February 2007

The transaction may mean that fewer staff are required. As the incoming employer, this will be the responsibility of the buyer. The buyer must ensure that it is a proper redundancy situation where the need for employees to do work of a particular kind has ceased or diminished for an 'economic, technical or organisational reason'. If redundancy is necessary, the employee may be entitled to redundancy payments. It is necessary to decide whether the payments are being made by the seller (in which case the purchase price may rise) or by the buyer (in which case the price may be lower to offset the expense). Either way, it will be the buyer who will be legally responsible if the proper procedure is not followed. There are statutory minimum amounts for redundancy pay based on age and length of service. More detailed guidance is provided in BDA advice sheet D10: Redundancy, which includes a table for the calculation of redundancy payments. Trainer appointments are personal and not transferable by sale of the practice. A purchaser cannot therefore assume appointment as a trainer after the purchase of an established training practice.

Redundancy

Redundancy payments

Vocational dental practitioners

The purchase of a practice with associates needs particular care. Associate agreements name the current practice owner as a party and are personal to the individuals concerned. If the buyer wants the arrangement to continue, a new agreement with the associate must be entered into. Buyers should seek to speak to associates at the earliest opportunity once the purchase has been agreed; however the associate has no obligation to the buyer until a specific agreement has been reached. Where the agreements between seller and associates are verbal or have been inadequately drawn up, all parties need carefully to consider where they stand. An associate without a clear agreement on protecting the owner's goodwill may decide to leave and induce patients to a nearby practice. If patients do leave the practice, any claim for misrepresentation would be against the seller, not the former associate. Long standing associates may claim that their long presence in the practice justifies some share in the ownership of the practice's goodwill. They may seek a financial arrangement with the seller, before the seller sells on to the buyer. If this happens, the buyer is on reasonably safe ground since they will be securing the goodwill from both the seller and the associate. If a preparatory settlement is not made, the buyer may need to think about 'buying up' the associate after the sale, with the practice sale price reduced accordingly. The buyer could then re-establish a conventional associatepractice owner relationship, in which goodwill belongs entirely to the buyer as the new practice owner. Alternatively, the buyer may decide to take the risk of the associate leaving and setting up nearby. In some circumstances, where a dental practice has existed on a particular site for a long time and is well known in the local community, this could be a risk worth taking.

Practices with associates


Agreements

Finanical agrangements

It is essential that patients are told about the practice sale. Preferably the seller will write to the patients, recommending the buyer for their future care, though the buyer can also contact the patients. If the buyer wishes the seller to take some action, this should be specified in the sale agreement. Model letter from seller to patients The content of this letter will depend on the circumstances of the sale, for example
BDA February 2007

Informing patients

that the purchaser was previously an associate or already owns practices in the locality, or that a dental company has bought the practice. The letter below is intended for a situation where the purchaser has never worked at the practice or in the locality.

Dear . I am delighted to be able to tell you that the Happy Smiles Dental Practice has been bought by Dr John Smith. From (date), I will be retiring and in future, if you are happy with this arrangement, Dr Smith will provide your dental care. I am very sad to be retiring after X happy years at the practice but I am very pleased to be leaving Dr Smith to care for my patients. Dr Smith qualified in (date) at (dental school) and for the last X years has been practising in Y. His particular clinical interests include Z. Dr Smith will be making changes and improvements to the practice that will, I am sure, result in an even better standard of care and service. I would like to take this opportunity to thank you very much for your past confidence in the care we have provided for you and I very much hope that you will stay with the practice in the future. Dr Smith will shortly be writing to you separately about future practice arrangements but in the meantime, if you would like any further information, please do not hesitate to contact me. Yours sincerely

Selling a practice after death


NHS contract

For three years after a practitioner's death, the Dentists Act permits a non-dentist widow, widower or other representative to carry on the practice. This is to give the relatives time in order to deal with the business and to sell it. However, if there is an NHS contract held at the practice which is in England and Wales, the contract terminates after seven days of the contractor's death unless the representatives are able to get another dentist in to take over, whereby the contract is extended for up to three months in the first instance. The contract can then be extended by another six months with the agreement of the PCO. These extensions are so representatives of the deceased can find a buyer for the practice and complete the transaction. There are often strong arguments for disposing of a practice as quickly as possible, while there is still saleable goodwill. Any lay person left with a practice to run can contact the BDA for advice. If necessary, property can be kept in the widow's or widower's hands, with a sale of equipment, stocks and goodwill dealt with separately. See BDA advice Sheet B4: What to do when a dental practitioner dies for more information.

Advice
BDA February 2007

Once a specific sale or purchase is contemplated, advice from an accountant and solicitor will be essential, especially those with experience of dental practice work. Where a property sale or purchase is involved, a local valuer's advice should always be taken. A local valuer will also be familiar with local planning rules. 10

When choosing advisers, take into account the following factors: Local reputation: Ask around and see who other dentists recommend Cost: Professional advice can be expensive and it is worth asking for quotes from several firms in order to gauge the cost of the sale Rapport: Most professional advisers will offer a free initial consultation to offer their services to you and to build a rapport with you - it means that you can get to know each other without having to commit to their services Results: What results have they had in the past? Can they provide a name of someone who will provide a testimonial for their service? Dental supply houses will undertake valuations of equipment and dental consumables. A number of agencies dealing with practice sales and the valuation of goodwill advertise regularly in the British Dental Journal and again a list is available from the BDA. The method of charging for these services is generally to charge the vendor a percentage of the selling price or, in the case of leasehold properties, based on the yearly rent. The BDA produces a range of advice sheets, which may also be useful for someone taking over a practice for the first time. See the website at www.bda.org or contact BDA Shop (020 7563 4555/bdashop@bda.org) for the latest list. Members with general questions about the sale or purchase of a practice can always contact the BDA's Business Team on 020 7535 5864 or at businessteam@bda.org

Practice sales are complex and individual and the British Dental Association does not produce a "model" purchase or sale agreement. The clauses described below are a helpful starting point. They are only for guidance, as the actual contract should be drawn up between the buyer's and seller's solicitors. Sale and purchase This clause will state that the seller will sell "with full title guarantee" and the buyer will buy the assets and goodwill of the practice on the date of completion as a going concern and (assuming this is the case) free of all charges in favour of third parties. The price The price will be stated and will be apportioned as to part for the goodwill, part for any uncompleted contracts, part for fixtures and fittings and part for the property. It is advisable for both buyer and seller to discuss with their valuers and accountants how the price should most appropriately be apportioned. The stock of dental materials will be valued on completion and then paid for by the buyer. Normally a deposit of 10% will be paid when the agreements are exchanged. Apportionments Prepayments made by the seller in respect of goods which have been ordered but not delivered or services contracted for but not rendered will be refunded by the buyer to the seller. Employee rights and expenses, including holiday pay and holiday entitlement accrued but not taken, should be apportioned.

Practice sale/purchase agreement guide to clauses

BDA February 2007

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Book debts These will remain the seller's property, but the buyer will endeavour for the 12 months following completion to recover them on the seller's behalf. After 12 months the seller will be entitled to collect any such outstanding debts direct from the debtor. Warranties (undertakings on which the seller can be sued if found to be untrue and the buyer thereby incurs a loss) It is usual to list the seller's warranties in a Schedule. The seller repeats the warranties immediately prior to completion and confirms that they will remain in force after completion. If the statements regarding warranties are going to be qualified in any way, this should be provided for separately in a Disclosure Letter. The Seller's warranties: (this is not an exhaustive list and should be tailored to the specific requirements of the Buyer) The seller is absolutely entitled to the goodwill of the practice, all fixed and moveable plant and equipment, the stock-in-trade, all uncompleted contracts, records and the premises and no third party has any claim on such assets The practice accounts for the latest year ending are true and accurate The seller is not involved in any litigation relating to the practice, none is pending or threatened and the seller is not aware of any facts which could give rise to it The seller's fixed and moveable plant and equipment are in good repair and are capable of doing the work for which they were designed and/or purchased Since [date], the practice has been carried on as a going concern The seller has not defaulted under any of the uncompleted contracts The seller has properly operated the PAYE system and has complied with all its reporting obligations to HM Revenue & Customs The seller has disclosed to the buyer's solicitors all insurance policies relating to the practice and nothing has been done/omitted to render any policy invalid The books and records are kept in accordance with the requirements of the General/Personal Dental Services Regulations and the Business Services Authority It is common to list all full-time and part-time employees in a Schedule and to confirm that the details of the employees are true and accurate All employment contracts have been disclosed to the buyer's solicitors and there are no other existing terms and conditions of employment The seller has not breached any service contract and nor is the seller liable for any redundancy payments, wrongful or unfair dismissal claims or for failure to comply with any employment tribunal order The seller has not made any gratuitous payment in connection with the actual or proposed termination or suspension of an employee It is usual to list all Associates in a Schedule and for the seller to confirm that there are no other Associates in the practice and that all agreements drawn up between the seller and the Associates have been disclosed to the buyer and are complete and accurate in all respects. Discharge of liabilities All the seller's debts and liabilities at the date of completion, except for those expressly taken over by the buyer, will remain the seller's responsibility. Uncompleted contracts All uncompleted contracts will, subject to the necessary consents of third parties, be assigned to and completed by the buyer. The buyer will indemnify the seller against all losses arising in respect of such contracts.
BDA February 2007

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Uncompleted treatment In respect of NHS treatment: The seller will complete as many courses of treatment as can properly be completed prior to the date of completion and will be entitled to all the remuneration for such treatment The seller will terminate all inactive patient treatment plans up to completion If a patient is treated by an associate of the practice both before and after completion, the fees will be split between the seller and the buyer and any payment to the Associate adjusted accordingly The seller will supply details to the buyer of all uncompleted courses of treatment, if applicable The seller and the buyer will inform the Primary Care Organisation of the terms of the agreement Remuneration in respect of uncompleted treatment for non-NHS patients if undertaken prior to completion will be billed by and paid to the seller and, if undertaken after completion, to the buyer All continuing care and capitation patients registered with the seller will be transferred to the buyer or his/her nominee. Employees The seller will comply with any duty to give employees information about the proposed transfer of their contracts of employment to the buyer. The seller will indemnify the buyer up to completion for any breach by the seller of any employment contract or any statutory breaches and for any liabilities arising in respect of death, personal injury, disease, illness or discrimination if the cause of action arose prior to the completion date. Associates The interests of the seller and the buyer may be very different. Remember that associate agreements are personal to the parties and cannot be assigned. Arrangements will vary according to whether the purchaser wishes to engage the associates. The seller will notify all associates of the sale of the practice, ensuring that the notice period is adhered to. Where the purchaser wishes to engage the associate, it will be his responsibility to negotiate new contracts with each associate individually. The seller will cooperate to that end. Binding out agreements apply between the seller and the associate. If an associate does not agree to be engaged by the buyer on the same terms and conditions as before and the goodwill of the practice is subsequently damaged, the buyer may want an indemnity from the seller. Such an indemnity would be difficult to quantify and it may be better for both parties to take this into account in the purchase price. Premises Appropriate conveyancing provisions need to be included. Completion On the completion date, the risk in the practice assets passes to the buyer and title to any assets which are capable of delivery passes on such delivery.
BDA February 2007

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At completion: The seller hands over the relevant assignments or transfers including the assignment of goodwill (it is usual to annexe an agreed draft) The buyer pays the balance of the price for the goodwill, uncompleted contracts, the fixtures and fittings and the property The buyer pays for the stock-in-trade as agreed in the Sale Agreement. If completion is delayed, other than due to the seller's default or delay, the buyer pays interest at a specified rate. Value Added Tax Both parties will endeavour to ensure that the sale of the practice is treated neither as a supply of goods, nor as a supply of services for VAT. If VAT is held to be payable, the buyer will pay the seller such tax within 30 days of delivery of the appropriate tax invoice. The Seller may retain all credit for VAT on goods and services supplied to him and any overpayment of VAT prior to completion. Conduct of the practice prior to completion The parties will collaborate fully on all matters prior to completion. During that period: The seller will run the practice in the ordinary course of business and on a normal commercial basis The seller will not, without the buyer's consent: o Incur any capital expenditure for which the buyer would become liable o Enter into any contract which cannot be terminated without compensation or on one month's notice, or is not in the ordinary course of business o Engage any new employees or associates The seller will indemnify the buyer against any loss the buyer incurs through the seller's failure to comply with this requirement. Further assurance and use of name The seller will give the buyer all reasonable assistance before and after completion in investing the full benefit of the practice in the buyer and ensuring that the buyer has sole rights to use the name of the practice Confidentiality and restrictive covenants The seller will observe strict confidence while information regarding the sale is not public knowledge. For an agreed period following completion the seller either alone, jointly, with some other person or as locum tenens will not within an agreed area: Compete with the buyer's continuance of the practice Solicit for treatment persons who had been patients of the practice in the last [X] years prior to completion Induce any employee to leave the buyer's employment Disclose any information concerning the practice Insurance The seller will keep insured the assets to be transferred at completion and will arrange for a note of the buyer's interest to be endorsed on the relevant insurance policies.
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Access to documents and information The buyer will allow the seller to inspect and copy all records that the seller hands over to the buyer for six years from the date of completion. Announcements The seller will announce by letter in agreed form to all suppliers and patients of the practice the transfer of the practice and endeavour to effect a proper introduction of the buyer to all the patients. The parties will make an announcement to the employees of the practice in an agreed form. Neither party will make any other announcement without obtaining the other's prior consent. Withholdings The buyer will withhold X,XXX from the sale price for a period of six months to cover any failed courses of treatment carried out by the seller. After the six month period has elapsed, the remainder of the money will be paid to the seller, and full documentation provided on any courses of treatment that have been redone. The failed treatments will be repaired at the charge of XXX per hour. Miscellaneous There will then usually follow a clause covering miscellaneous matters, such as responsibility for costs, that the agreement should be binding on the parties' successors, that no variations should be effective unless in writing and dealing with the giving of any notices under the agreement. Conclusion Finally, it must be stressed again that there is no "standard" transaction. Both parties to the agreement should contact their professional advisers at an early stage in the proceedings to obtain advice appropriate to their circumstances. And remember that any leasehold property involved will constitute a separate undertaking.

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British Dental Association 64 Wimpole Street London W1G 8YS Tel: 020 7563 4563 Fax: 020 7487 5232 E-mail: enquiries@bda.org www.bda.org BDA February 2007