CPD Training for Dentists at UCL’s Eastman Dental Institute on 22 June 2016
The Eastman Institute are holding a series of CPD lectures making up a course entitled ‘Financial management for the General Dental Practice’
Our Hugo Barton will be giving a seminar on Thinking of Buying and Selling a Practice?
which shall include discussion on and interactive learning:
The course is now available to book through Health England’s Ewisdom website.
A share sale is usually the sale of all the share in a company limited by share.
No TUPE applies- i.e. no statutory consultation with staff pre completion is required
As a buyer caution is needed as you are buying the company as an entity and it is a legal person. Accordingly, any arrears of tax or penalties will attach to the Company and so:
-Due Diligence is required regarding the Company- i.e. full enquiry should be made by the buyer’s accountant and lawyer
-The Share Sale Agreement tends to be lengthy and contain protection clauses for the buyer. The Sellers warrant that matters are in order and as a buyer you can rely on these statements.
A share Sale can be very quick as a transaction as any commercial leases owned by the company do not require a licence to assign from the Landlord, however, the in depth due diligence and lengthy share sale agreement tend to take time to process.
An Asset sale is where the buyer acquires the assets that make up the business of the seller (which may be a company).
Assets may include:
-Goodwill
-Property
-Equipment
-Stock
-the benefit of contracts like an NHS Contract
-Intellectual Property; Like the web site and any brand
This may be a preferable way for a buyer to proceed as he/she can avoid liability that attaches personally to the seller like tax!
It has now been over a decade that dentists can run a dental company or a Dental Body Corporate (DBC). We are commonly asked what proportion of dental shareholders (i.e. registered dentist or a dental care provider) have to be involved?
Well the answer is none!
This allows dental companies to be a potentially attractive vehicle for non-dental investors.
This has to be tempered by the fact that the legislation requires that a majority of the Directors have to be dental(i.e. registered dentist or a dental care provider).
It is advisable for a Shareholder’s Agreement to be entered into at the DBC formation to set out the shareholder and director obligations. This is confidential and should hopefully avoid dispute later.
A Cross Option is also an invaluable tool to consider at the same time to cover the critical illness or death of a party and use life policies to ‘cover’ these circumstances.
HealthCare Law through it’s Corporate Social Responsibility Policy continually seeks ways in which to give something back to those communities which have supported the firm.
Whether by raising funds for a charity or through pro-bono work.
Members of staff annually vote for a charity of the year which will then be the focus of the year.
Pro-bono work
Our staff generously give their time and experience to charities along with pro-bono legal advice:
Canterbury Festival: Board Director a year round million pound turnover International Arts Festival
Law Society: active National Company Law committee membership
SME Working Group
Department of Business Innovation and Skills Late Payment Working Group
Environment
We are members of The Legal Sustainability Alliance which is an inclusive movement of legal firms and organisations
committed to working collaboratively to take action to improve the environmental sustainability of their operations
and activities. There are more than 390 members globally and rising….
Many healthcare business owners are under the impression that their commercial lease is repeatable or renewable under the Landlord and Tenant Act 1954 as amended (LTA 1954).
For lawyers who are conversant with Commercial Property the situation is more complex! The legislation basically allows for a commercial lease to be either ‘inside’ or ‘outside’ the LTA 1954. Where outside the LTA 1954 the lease comes to an end at the end of the term of the lease and any further lease or licence is totally at the discretion of the Landlord.
To do this the Tenant normally enters into a statutory declaration ( or simply notice where the parties are not in a hurry) effectively removing their rights of renewal under the LTA 1954. Landlords and their advisers choose this route where for instance there may be development potential for the site and potentially in the short to medium term. This makes life simple and avoids the need to pay any compensation (which is a multiple of the Business Rates ) to the Tenant if they have a commercial lease inside the LTA 1954.
Even the renewable leases are prevented from renewing by the Landlord putting forward one of the grounds for opposition under the 1954 Act.
Those grounds could include the No fault grounds of opposition by the Landlord
A tenant with security of tenure under the LTA 1954 is entitled to compensation if it does not obtain a new lease solely because the landlord establishes one of the no fault grounds. These grounds are set out in paragraphs (e), (f) and (g) of section 30(1) of the LTA 1954:
Calculation of compensation
Compensation is calculated by applying a multiplier to the rateable value of the property. The compensation will be doubled if the tenant and any predecessor have been in occupation of the property for the purpose of the same business for 14 years or more (see Rateable value and Appropriate multiplier).
Therefore, calculations for the compensation are as follows:
(Section 37(2), LTA 1954.)
Rateable value
The rateable value of the property is established by reference to the valuation list that is in force on the date of service of the notice under section 25 of the LTA 1954, or the request under section 26 of the LTA 1954 (section 37(5), LTA 1954).
Surveyors will assist the landlord and tenant in establishing the rateable value.
Where the holding includes domestic property, as defined in section 66 of the Local Government Finance Act 1988, that part of the holding is disregarded for the purpose of determining the rateable value (section 37(5A)(a), LTA 1954 ). If the tenant occupied the whole or part of the domestic property on the date the landlord served its section 25 notice or counter-notice to the tenant’s section 26 request, the tenant is entitled to additional compensation of a sum equal to the reasonable expenses in vacating the domestic premises (section 37(5A)(b), LTA 1954 ). If the sum cannot be agreed, it can be determined by the court (section 37(5B), LTA 1954 ).
The appropriate multiplier is set out from time to time by a statutory instrument (section 37(8), LTA 1954). The current order is Landlord and Tenant Act 1954 (Appropriate Multiplier) Order 1990 (SI 1990/363) and this sets the multiplier as one.
If the tenant has been in occupation of the property for the purpose of its business for 14 years or more, the tenant will be entitled to double the rate of compensation (section 37(2) and (3), LTA 1954). The 14 year period is calculated backwards from the date of termination that was specified in the notice under section 25 of the LTA 1954, or request under section 26 of the LTA 1954.
If there has been a change in occupier during the 14 year period, the current occupier must not simply carry on the same type of business, but must be a successor to the actual business. It is not clear what successor to the business means, but it is thought that there must be some transfer of the goodwill of the business (Cramas Properties Limited v Connaught Fur Trimmings Limited [1965] 1 WLR 892).
Compensation for misrepresentation
The court can order the landlord to pay the tenant compensation if it subsequently appears that misrepresentation or concealment of material facts led to any of the following:
The court can order the landlord to pay such sum as appears sufficient to compensate for the loss or damage sustained by the tenant as the result of the order, refusal or the fact that the tenant has quit (sections 37A(1) and (2) LTA 1954).
Section 37A of the LTA 1954 requires fair dealing. In the case of Inclusive Technology v Williamson [2009] EWCA Civ 718, the Court of Appeal awarded the tenant compensation under section 37A of the LTA 1954 in respect of the landlord’s misrepresentation. The landlord had served a section 25 notice with a covering letter opposing renewal of the lease on the ground contained in section 30(1)(f) of the LTA 1954. The landlord then decided not to proceed with the works due to a change in market conditions and an increase in the cost estimate of the works. The landlord failed to inform the tenant of its change of plans
Contracting out of the right to compensation
Any agreement to exclude or reduce the payment of compensation is void, unless one of the following exceptions is satisfied:
(Section 38, LTA 1954.)
If the parties intend to document their respective liabilities and neither of these exceptions applies, reference to any compensation payment must be drafted with care or the agreement may be void. It should be made clear that the landlord agrees to pay the full amount of any compensation, without exclusion or reduction, and the tenant agrees to pay the full amount of its liabilities.
For an analysis of when to include a clause excluding compensation in a lease.
CONCLUSION
We may well have heard of these terms, but in the eys of legal speak, just what do they represent?
Agreement – ideally a written contract between parties
Due Diligence – formal process for a buyer’s accountants and lawyers to look into the likely matters and liabilities that may affect a Business that is transferring or on a share sale
Enquiries– a more often used word for lawyers asking questions about an asset or entity such as a company
Indemnity – a promise by one party to pay another party a sum to remedy a breach of a representation and this payment is without mitigation
Warranty – a representation that can result in a claim by a party but the Warrantor can under the law mitigate the claim
Retention – one party to a transaction can hold back funds if there are matters that are in doubt and not have to sue for the funds which the other party may not have!
With recent legislative and political changes it now seems that the conceptual gap between Tax Evasion and Tax Avoidance has narrowed and potentially closed!
The GAAR anti avoidance regime now in place reverses the burden of proof so that the tax payers (and not HMRC) have to show the reasonableness or primary commerciality of any arrangements. The old game of tax-advisers trying to beat HMRC in an arms race of beating prescriptive HMRC legislation would appear to be drawing to a close.
The GAAR Study Group Report was based on the premise that the levying of tax is the principal mechanism by which the state pays for the services and facilities that it provides for its citizens, and that all taxpayers should pay their fair contribution. This same premise underlies the GAAR. It therefore rejects the approach taken by the Courts in a number of old cases to the effect that taxpayers are free to use their ingenuity to reduce their tax bills by any lawful means, however contrived those means might be and however far the tax consequences might diverge from the real economic position.
The last quote from the judgment of Lord Clyde in the Ayrshire Pullman case epitomises the approach which Parliament has rejected in enacting the GAAR legislation. Parliament is keen that taxation is not to be treated as a game where taxpayers can indulge in any ingenious scheme in order to eliminate or reduce their tax liability.
So from an entrepreneurs’ point of view it is essential to appreciate that, so far as the operation of the GAAR is concerned, Parliament has decisively rejected this approach, and has imposed an overriding statutory limit on the extent to which taxpayers can go in trying to reduce their tax bill.
The limit of tax Avoidance is reached when the arrangements put in place by the taxpayer to achieve that purpose go beyond anything which could reasonably be regarded as a reasonable course of action.
However, care needs to be taken as there is a vocal moral and political debate that Tax Avoidance as well as Tax Evasion are offensive to society and both represent a breach of moral opprobrium. So tax avoidance schemes that are a reasonable course of action today may not be seen in that light in the future!
