Whilst selling any business can be a complicated process, there are specific regulatory considerations and issues that arise when selling a care home.
Whether you are an operator running a group of care homes wanting to consolidate your portfolio, or a sole operator wanting to retire and enjoy your next chapter, making the decision to sell a care home is not an easy one. However, with the right legal support and planning, you can increase the likelihood of a successful, smooth transaction.
Whatever the reason for selling your care home business, the route can be long, stressful and full of potential pitfalls. Our specialist health & social care team can provide all the advice you need about the legal side of selling a care home. We work in partnership with you.
We have extensive experience in advising on the selling of care homes and are able to include expertise from other teams within Birkett Long including regulatory, commercial property law, employment law and dispute resolution.
Call Tim Field, our health and social care solicitor, on 01206 217366.
Structure of the transaction: share sale or asset sale
One of the first considerations once you have decided to sell your care business is to determine if you will sell the shares in your company (assuming the care business is operated by a company limited by shares) or to sell the assets that make up the care business.
It is often the case that as a seller it is more efficient, from a tax perspective, and provides a clean break if you sell the shares in the company rather than the assets. That being said, if the company operates multiple care homes, has a range of business ventures or holds a significant liability or risk an asset sale may be necessary. Alternatively it could be that undertaking a form of company restructure immediately preceding the scale offers the most desirable outcome for all concerned.
No matter what your circumstances may be we are able to discuss the full range of options with you and assist you in coming to the right decision for you.
Due diligence: preparation is key
When asked about the sale of any business our lawyers will often say that the most important factor for a seller is to ensure that they are prepared.
A buyer is no doubt going to be paying a significant amount of money for a care home business and therefore will want to undertake a detailed due diligence process to obtain a good understanding as to what it is that they are acquiring and understanding any risks or potential issues that may arise and devalue the assets they are intending to purchase.
A well organised seller will be able to provide detailed replies to the due diligence enquiries that are raised by the buyer. Matters relating to employees, accounts, assets, general contracts, resident’s contracts, property, regulatory compliance, policies and procedures such as GDPR and health and safety and tax will all be questioned amongst others.
We are able to assist sellers by sharing with them those questions that are likely to be raised by a buyer and help the seller prepare the information and present it in an orderly fashion to a potential buyer, often through the use of a data room which we are able to host.
If a seller is disorganised, or unable to provide full and clear answers to a buyer it will no doubt create nervousness within the buyer which may well have a detrimental impact on the amount the buyer is willing to pay for the business or prevent the buyer from continuing with the purchase at all. Similarly if there is time spent requesting more information or clarity of responses this will likely add to the costs that are incurred and the time that it takes to complete the sale.
Due diligence enquiries from buyers’ solicitors always take time to complete, but with the right preparation early on, it does not have to hold the sale up.
Sale and Purchase contract
The agreement for the sale of your business is likely to be long and complex no matter if you are selling the assets or shares in a company. A sale and purchase contract is often split into a number of different sections. The main body of the contract will contain the operative clauses which deal with the mechanics of the sale itself, what is being sold, how much will be paid, when it will be paid, confidentiality, restrictions on the seller post completion.
A number of schedules will then be added to the agreement, often the most important of these schedules will be the warranty schedule. Warranties are included within a sale and purchase contract as they provide the buyer with confidence and reassurance as to what it is they are purchasing.
The warranties act as a series of promises that the seller is giving to the buyer relating to various aspects of the business and assets that are being sold. If it transpires that the warranties are untrue and the seller has not made a disclosure to the buyer it is possible that the buyer will be able to make a claim against the seller post completion and recover some of the purchase price.
The employees of a care home
The employees of a care home are key to the operational success of the business and how they are managed as part of the sale process is important. If the business is being sold by way of a share sale there is no change to the employment of the staff (as they will continue to be employed by the trading company).
However things are quite different if the business is sold by way of an asset sale. In this instance the employees will transfer to the new buyer under The Transfer of Undertakings (Protection of Employment) Regulations 2006, otherwise known as TUPE. These are technical regulations which require certain processes and procedures to be followed by both the seller and buyer to ensure that no inadvertent liabilities arise. We have a dedicated employment law team which is able to assist you with this process.
CQC
If a buyer is not already registered with the Care Quality Commission, or CQC, registration can take 3 months (if there are no hiccups) and so it is really important that they make a start on this very early in the process. However, it can be possible to exchange sale contracts, with completion to follow upon registration.
If the shares of a company already registered with the CQC are being purchased, the CQC will need to be notified of the proposed “change of control” in the company.
For a no obligation chat on the phone about selling your care home, call Tim Field, our health and social care solicitor, on 01206 217366.
