Buying or Selling a Care Home Business
Blacks Solicitors’ specialist Care Home team regularly provide pragmatic legal advice to individuals and businesses looking to buy or sell care home businesses in the UK.
If you are buying or selling a care home business, our expert team can guide you through the whole process from agreeing terms with the other party to completion and beyond, including:
- Preparing Heads of Terms
- Assisting you with the Due Diligence process
- Preparing Share Purchase or Asset Purchase Agreements
- Advising on the transfer of employees (TUPE)
- Advising on the transfer of care home premises
If you are thinking of buying a care home we have prepared a checklist of the main issues which you ought to consider before you decide to make that commitment on your next business venture!
- Structure of Deal: “Shares or Assets”?
The structure of the transaction is of fundamental importance and you will need to consider whether you are intending to purchase the care home business by way of purchase of the share capital in the trading company or by way of purchase of the business and assets as a going concern.
You will need to carefully consider:
- The location of the care home and the existing level of supply of beds
- Whether there are any plans for any new care homes to be built
- The state and value of the premises including fixtures, fittings and equipment
- If the existing premises are fit for purpose
- If you plan to increase capacity it would be prudent to check the likelihood of obtaining planning permission
- What level of future capital investment will be required to achieve your future plans
- Service Levels and Occupancy
- Gain a sound understanding of the current and historical occupancy levels
- Be clear on what type of care is provided (residential care or residential care with nursing)
- Consider the type of residents you wish to accommodate and therefore staffing obligations
- Know if the business provides any niche services which make it different to other nearby care homes
- Get early sight of the framework agreement with the relevant Local Authority and ascertain if there is any protocol documentation associated with them
- Ensure you have had site of the business’s terms of residency and, where appropriate, third party guarantees are in place in respect of payment of fees
- The Care Quality Commission (CQC)
You must ensure that the CQC are involved as early as possible with the proposed transaction and kept up to date as regularly as necessary, and be registered with the CQC.
The CQC will closely monitor any new care home owner and inspect and regulate the standard of care at the home. As part of your due diligence, you should ensure you have an understanding of the business’ prior track record and ensure you have sight of the results of the latest inspection.
If you buy the shares in a company the employees will continue to be employed by that company, and if you are to purchase a care home by way of a transfer of a going concern, then the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) will apply.
In addition to having a “Registered Provider” registered with the CQC you will also need to ensure that there is a “Registered Manager”. You will also need to ensure you have had sight of the contracts of employment for all employees and find out the following for each employee:
- Holidays taken/accrued
- Levels of illnesses and /or general absences from work
- Details of any grievances or disciplinaries
Ascertain the level of staff turnover and, where possible, ensure that you meet as many of the employees as possible before you complete the purchase (in particular senior managers and any Registered Manager).
Be clear as to how you are going to fund your purchase and it is worth exploring what different types of funding are available and ensure you are comfortable with the borrowing costs, including arrangement fees and the level of security which a lender may require.
Ensure you have a good understanding of what your anticipated costs will be, which will include: legal costs; surveyor’s fees; lender fees; the accountancy/tax adviser fees; and stamp duty.
- Capital Allowances
Ensure you have ascertained whether the vendor has made any claims in respect of capital allowances and whether any such allowances are available.
- Heads of Terms
Ensure that a Heads of Terms document is signed by your vendor. Whilst the Heads of Terms document is not legally binding, once signed it does serve to remind the parties as to the terms that have been agreed.
- Warranties and Indemnities
Following completion of the due diligence exercise you ought to have a decent understanding of the business you are purchasing and whether you are buying the shares or the business and assets as a going concern.
Your solicitor will need to ensure that the purchase contract provides you with as much protection as possible in terms of extensive warranties (and indemnities where appropriate) and appropriate tax covenants.
If you are considering purchasing or selling a care home business and would like more information about Blacks’ services, or for a free no obligation discussion, please email or call our Care Home team today on 0113 227 9341.