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Healthcare Bulletin

A quarterly update from our Healthcare Law team keeping you informed of the latest updates on legislation, policy and commentary on issues affecting healthcare professionals.

Latest Issue

In the latest edition of our Healthcare Bulletin we outline the main issues that you need to consider if you are buying a pharmacy, take a look at dental practice equipment warranties, plus why GP partnership agreements are important and finally fixed costs in clinical negligence cases which are on the not too distant horizon. Our dental expert Nicola Lomas has published a series of blogs all about dentistry practice matters, covering a variety of topics from exchange of contracts to stock valuations which might be of interest to you. Please follow this link to view the dental blogs.

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Buying a Pharmacy?

Wednesday 26th October 2016

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Healthcare Bulletin - Issue 3

Buying a pharmacy is undoubtedly one of the most significant business decisions a pharmacist will ever undertake. If approached correctly, it can be prove a profitable investment; if handled incorrectly, however, the buyer risks losing their investment.

As is true for any business, the acquisition process can often be complex, with many legal implications to consider and various traps and pitfalls awaiting the unwary or unprepared. For pharmacy businesses, further complexity is imposed by the strict regulation of the sector. With additional duties upon the buying pharmacist(s) and numerous regulatory compliance issues to be considered, it is imperative to get things right.

There is no substitute for a buyer securing early and quality legal advice from a law firm specialising in the buying and selling of pharmacies. Occasionally, our firm is asked to pick up the pieces after the event by pharmacists who have bought pharmacies acting on poor advice, and we have been instructed to recover their losses through litigation, which is notoriously costly and uncertain. Without question, it is therefore far better to receive sound advice at the outset of the process, than to rely on the vagaries of litigation to recover your losses afterwards. 

Pre-contractual Negotiations

We would always advise that the parties agree upon a set of Heads of Terms at the outset. This document sets out the main points of the deal, and reduces scope for disagreement between the parties later on. Generally, the Heads of Terms are not intended to be legally binding. Certainly, from a buyer’s perspective, until all necessary investigations are carried out, you will want the option to withdraw from the transaction at any point. However, if the Heads of Terms inadvertently contain the essential elements of a contract, the parties may end up unintentionally being contractually bound. It is therefore important to instruct solicitors when preparing such documents.

Financing the Acquisition

Finance is usually obtained through a pharmaceutical wholesaler or a bank. With the former, the buyer’s discretion to purchase stock cost-effectively from a variety of suppliers will be fettered, as the wholesaler will require that, as a condition of providing the finance, significant levels of stock are purchased from it. A bank’s security is established through either a debenture over the buyer’s assets (if the buyer is operating through a limited company) or a charge over the business premises, possibly supported by a personal guarantee and/or a second charge over the buyer’s home. 

Due Diligence

Due diligence is a vital pre-acquisition exercise in which the buyer checks the health of the target business, its operations and the accuracy of any information provided by the seller. Enquiries should be made of NHS England’s local area team, doctors’ surgeries, nursing homes and whether any third party relocations or NHS contract applications are pending, all of which may adversely affect profitability. The buyer should obtain the last three years’ annual accounts and FP34s to accurately quantify historic prescription sales, as well as current management accounts, which will reveal any recent business deterioration.

Regulatory Issues

Change of Ownership Consent – when buying a pharmacy business (as opposed to acquiring the shares in a company), you will need to make an application to NHS England for a change of ownership. Completion should also be made conditional upon such change of ownership being registered.

Electronic Prescriptions – regulation requires the buyer to inform patients who had previously nominated the target pharmacy for receiving electronic prescriptions that the ownership has changed and check that they wish to continue to nominate the pharmacy. This needs to be undertaken within 6 months of change of ownership.

Fitness to Practise - pharmacies are required to provide a Fitness to Practise declaration to NHS England before they can provide NHS services. As this is the backbone of a dispensing pharmacy, it is important to check that there are no problems in satisfying these requirements before committing to buying a pharmacy.

Ownership of premises – the GPhC needs to be notified of a transfer of ownership of any pharmacy premises within 28 days of the transfer taking place.

Superintendent Pharmacist – if the buyer is a limited company which does not already own pharmacy premises, it will need to nominate a superintendent pharmacist.

Pharmacy Premises

The buyer’s solicitors should investigate the seller’s title to the property to ensure it is free from mortgages or restrictions and can legally be used as a pharmacy. Enquiries should also be made to ensure that the premises are directly accessible from the public highway, are served by utilities and have planning consent. If the seller occupies the premises under a lease, the lease will be assigned to the buyer and a number of important factors need to be considered. Our expert commercial property team can help you with this. 

Need advice or wish to talk to us?

If you are interested in buying a pharmacy and would like to discuss any matters in more detail please do not hesitate to contact us.

Richard Hough

Partner & Pharmacist, Head of Healthcare
Tel: 0151 600 3302 / 0161 836 8800


Dental practice equipment warranties - what is reasonable to expect?

Wednesday 26th October 2016

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Healthcare Bulletin - Issue 3

If you are buying a dental practice, a major part of the work that a specialist dental lawyer will undertake on your behalf will be to negotiate the ‘warranties’. These warranties are a series of promises made by a seller that give you some assurances that the business you are acquiring is what you think it is.

The warranties will cover a wide range of issues and will be tailored to the specific practice and your personal requirements. A breach of one of the warranties given in the sale contract could allow you to make a claim against the seller following completion.

One area which is often in dispute between a seller and a buyer is the area of equipment warranties. Buying an operational practice will usually include a purchase of all of the equipment within that practice. However, don’t expect the type of warranty you get in Curry’s for your dishwasher!

The warranties given by the seller will apply on the date of exchange of contracts - which if you are buying an NHS practice is likely to be at least 28 days before the date you take over. It is wise to seek a provision in the contract to say that the warranties are repeated on the date of completion.

You are very unlikely to get a promise that something is going to continue to work for a year or two following the purchase. It is possible that you will get a promise that something will work on the date the warranty is given; although even this is not a given, as the seller may say that they are not sufficiently qualified to make such an assurance.

As a buyer, you might seek warranties not only that the equipment is in working order on the date of completion, but further that the equipment that you are being sold is adequate for both the continuation of the practice in the same way that the seller operates it (i.e. that the seller isn’t going to remove a vital item of equipment prior to the sale and leave you unable to practice). It is also reasonable to seek a warranty that the equipment available is sufficient and adequate to ensure that the practice complies with current GDC and CQC guidelines. A dental lawyer will also seek to give you protection that the equipment has been properly maintained, partially by making enquiries relating to certain statutory inspection and maintenance regimes (such as for the pressure vessels and X-ray machines), and partially by seeking warranties in relation to servicing and maintenance.

Finally, a sensible buyer would seek a warranty that the equipment within the practice is actually owned by the seller free from any finance or lease agreement.

A seller will look to limit the warranties in relation to equipment as much as possible. Firstly, by ‘disclosing’ against the warranty. If information is disclosed to you prior to completion, then you are usually prevented from making a warranty claim relating to that information.

A seller might also look to make a disclosure that you have had an opportunity to inspect the equipment and that any issues that would be reasonably apparent on such an inspection are deemed to be disclosed. This means that you would be prevented from making a claim for breach of warranty in relation to anything that would be apparent from an inspection of the equipment. The question is what sort of inspection would this cover. A qualified technician who inspects the equipment might find a fault in an item that a cursory glance around the practice would fail to bring to light. A sensible approach, if a seller seeks to disclose anything that would be apparent on inspection, is to ensure that this is limited to a brief visual inspection by a lay person.

Warranties will also be limited in terms of both value and time. You will have a limited amount of time to bring a claim for breach of warranty following a practice acquisition. It is important that you are aware of the timescales for bringing a claim. A seller will also seek to place a minimum value on any claim. For example, the contract may stipulate that any claim under the warranties must be worth at least £500 as a single claim or if you have a large number of small claims at least £10,000 added together (although the exact figures would be negotiable and will depend on the practice and circumstances).

It is important that both the seller and the buyer understand the warranties that are being offered in any sale agreement. Equipment warranties should offer the buyer some assurance that what they are buying will be fit for their requirements even if they don’t purport to promise that things won’t break in the weeks, months or years following your acquisition.

Need advice or wish to talk to us?

If you would like more information about dental practice equipment warranties please do not hesitate to contact:

Nicola Lomas

Senior Associste
Dental Lead
Tel: 0151 600 3321

GP Partnership Agreements – why does my practice need one?

Wednesday 26th October 2016

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Healthcare Bulletin - Issue 3

Due in large part to the legislation surrounding GP contracts, the majority of medical practices now operate as general partnerships. This means that, in addition to being physicians (first and foremost), those GPs acting in partnership are also business people, for whom the establishment of sound business foundations should be a paramount consideration.

The simplest and most practical way of achieving this is to have a professionally drafted partnership agreement put in place. This serves to govern the relationship between the partners and, provided it is drafted correctly, should set out clearly how the partnership is to be managed. In the absence of such express agreement, the partnership shall be governed by the ‘default provisions’ of the Partnership Act 1890 (the “Act”). These can prove very restrictive and may not always reflect the reality of your practice. Whilst the Act forms the basis of today’s partnership law and covers most of the necessary ground in setting up a partnership, it is far from all-encompassing and many of the provisions are now outdated. We therefore advise all our partnership clients to enter into a formal partnership agreement, not only to address these legislative shortfalls, but also as a means of providing clarity and certainty as to what can or cannot be done, reducing the areas where there may be conflict, and the adverse impact (and disruption) that entails.

A few key issues that you may wish to consider are as follows:

  • Capital contributions of each partner – subject to contrary agreement, the Act dictates that the capital of the partnership be shared equally and no account is taken of the partners individual contributions in determining the share of net assets or capital to which they are entitled. Where capital investment is to be unequal, you may wish to consider making the share of capital the subject of specific agreement.
  • Future funding – consideration should be given as to what arrangements there will be for future funding and how additional working capital requirements shall be fulfilled. 
  • Division of profits and losses – under the Act, partners are entitled to share equally in the profits of the partnership and must contribute equally towards any losses. In practice, there are many variations that you may wish to make to this default provision. Shares of profits may be unequal, capital profits may be shared in different ratios to income profits (for example, they may be shared by reference to the length of time a partner has been in the partnership since the acquisition of the asset from which they arise) and losses may be treated differently to profits (for example, senior partners may be willing to shield junior partners against all losses or losses exceeding a certain figure).
  • Fixed share partners – we appreciate that not all GP’s wish to commit to a full profit sharing (equity) partnership, with all the risks and commitments that entail. In this event, you may wish to consider making provision for ‘fixed share partners’ – in respect of which, more information can be provided, if requested.
  • Maternity, Paternity, Adoption and Parental Leave and Pay – partners are not covered by legislation providing employees who are parents with rights to take time off work. As such, you may wish to consider adopting equivalent or enhanced provisions to the statutory minimum entitlements afforded to employees and make specific provision for if, and how, a partner’s entitlement to and liability for net profit and losses shall be affected. You may also wish to consider whether, in such circumstances, the other partners shall be at liberty to engage locum cover and how the expense of such cover is to be borne/apportioned.
  • Provision for 24 hour retirement – whether you wish the partnership agreement to contain any provision concerning 24 hour retirement and return (to take advantage of the NHS pension rules enabling GPs to drawn down their pension whilst continuing their NHS responsibilities).
  • Termination of the partnership – in the absence of specific agreement, termination of the partnership can be enforced simply by one partner issuing a notice to the other partners. Such notice could force the sale of partnership assets and the redundancy of staff, and the creation of a new partnership, following dissolution, may require the prior approval of the relevant CCG or NHS England (as appropriate).

Even where there is a partnership agreement in place, in carrying out work for our partnership clientele, we frequently encounter changes that have occurred during the preceding year(s) (such as, the death of a partner, the transfer of a partnership interest from one partner to another or the allocation of profits/losses using a new formula or arrangement) and discover, quite often, that the operating agreement has not been amended to incorporate these changes.

It is imperative that your agreement reflects the current intentions of the partners and the operations of the current business. If your practice partnership agreement has not been reviewed recently, we would advise that now is a good time to do so – especially in light of the recent and significant changes to the NHS landscape and commissioning structure. 

Need advice or wish to talk to us?
If you would like more information about business partnership agreements, or any other partnership matter, please do not hesitate to contact:

David Seddon

Tel: 0151 600 3375

Healthcare Bulletin - Issue 2 - May 2014

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Healthcare Bulletin - Issue 1 - January 2014

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