FINANCE & LEGAL More Than a Dealing
Giles Clegg, who heads up the ‘Care’ team at Lupton Fawcett Solicitors, outlines the aspects buyers need to consider when purchasing a care home, stressing why it so much more complex than a normal property transaction.
When buying a care home, it is easy to just focus on treating the whole transaction as a property purchase. This is an easy trap to fall into but does not reflect the fact that you are buying a business and not just a property. So, what else should be on your checklist?
REGULATORY REQUIREMENTS
As you will know, the operation of a care home is regulated by extensive legislation. The CQC, which oversees the sector, tightened up its regulatory requirements and monitoring processes following the Winterbourne View scandal and the Francis Report.
Therefore, the first step for a potential buyer is to clear the regulatory hurdles and ensure it has proper processes in place to satisfy the CQC in relation to the operation of the business. The buyer will also need to carry out specific due diligence on the regulatory compliance history. This will not only be key for the purchaser but also any third-party funders. Ultimately, if authorisation to operate a care home business is withheld or revoked by the CQC, there is no business to operate.
“It is important the buyer understands the nature of the care business it wants
to acquire as the term ‘care home’ covers a whole range of potential activities.”
Many acquisitions are structured with a gap between exchange and completion, enabling the buyer time to receive final CQC approval.
RESIDENTS
It is important the buyer understands the nature of the care business it wants to acquire as the term ‘care home’ covers a whole range of potential activities. For example, are the residents principally funded by the local authority? Has anybody reviewed the local authority resident contracts? Do the current contracts cover all of the residents’ care requirements? If the residents are privately funded, what are the standard contractual terms?
EMPLOYEES
The care home manager is a key position in most care homes. As well as having to be registered with the CQC, the manager will play a fundamental role in ensuring compliance with the relevant regulatory requirements and the provision of care to the residents. The buyer will need to ensure that either the
- 36 -
current manager will be staying, to ensure a smooth handover, or that it has an experienced care home manager lined up.
If the buyer is proposing to purchase the business and assets of the care home (rather than buying the shares in the operating company) it will need to ensure the seller complies with its obligations under the Transfer of Undertakings Protection of Employment (TUPE) Regulations, which cover the transfer of employees to the buyer.
Other staff considerations in the buyer’s due diligence include: what pension provisions are in place; arrangements for locum staff; compliance with immigration laws; and minimum wage legislation.
COMPLAINTS HISTORY AND PRESS
COVERAGE We also advise that the buyer undertakes due diligence on the complaints and insurance claims history for the business and enquires about any historic litigation. Start by looking at reviews of individual care homes published by the CQC.
Under CQC regulations, the care home has a duty of candour in relation to any incidents that may occur at the home, which has been exacerbated by the introduction of ‘whistleblowing’ legislation. This can lead to negative media reporting, which can severely affect the reputation of the care home. A search of historic media coverage is therefore essential.
FUNDING THE PURCHASE
If the buyer requires third-party finance for the purchase, it is advisable to use a funder with experience in the sector. Funders are increasingly focussing on the buyer’s ability to comply with regulatory requirements and issues surrounding CQC inspections. This is because they increasingly lend against the value of the business and the property, as opposed to just the property. Our advice is to involve the funder at a very early stage to ensure that its requirements and creditor approval processes are clearly set out.
TAX
In structuring a potential acquisition, the buyer should consider how the purchase vehicle is structured to ensure it is tax efficient. It should also undertake due diligence into the historic tax affairs of the target business.
If you require further legal advice or information about buying a care home, contact Giles Clegg at Lupton Fawcett on 0113 280 2287 or email
giles.clegg@
luptonfawcett.law
www.luptonfawcett.com
www.tomorrowscare.co.uk
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48
