Whilst selling any business can be a complicated process, there are specific regulatory considerations and issues that arise when selling a care home. Arguably the most important for care homes that are run through a company will be deciding whether to proceed by selling the company itself, or having the company sell its business and assets.
Whilst prospective sellers should always take specialist advice on the tax implications of each route, from a regulatory perspective the biggest factor to consider is timing.
Operators of care services in Scotland must, by law, be registered with the Care Inspectorate. Where the business is run through a limited company, it will be the limited company which is the "registered provider" for these purposes.
A company sale involves the seller selling, and the buyer acquiring, the entire issued share capital of the company. Accordingly, the legal entity of the registered provider remains the same – only ownership has changed. The buyer has no need to negotiate new resident or staff contracts as these are already in the company’s name (although they should be checked for any change of control provisions) and the company's registration with the Care Inspectorate remains in place.
From a timing perspective, the company, as registered provider, will have an obligation as soon as the sale completes to notify the Care Inspectorate of the change in ownership and of any change in "relevant individuals" – namely any directors, managers and any secretary of the company. There is no obligation to seek approval or consent from the Care Inspectorate in advance of the sale.
Business and asset sale
In contrast, a business and asset sale will involve the company selling only some of its assets (e.g. goodwill, equipment, property etc) with certain other assets and liabilities remaining with the company.
From a regulatory perspective, the registered provider of the service will change – it will be the company up until conclusion of the transaction, at which point the buyer will be the new legal entity looking to operate the business. Accordingly, the buyer will have to make a new application for registration with the Care Inspectorate to become the registered provider for the care home.
From a timing perspective, this application will need to be made well in advance of the transaction concluding. Based on our experience, the process can be lengthy (running to between six and nine months) and there is no guarantee that the buyer's application for registration will be successful. Ultimately, if the registration is refused or is granted with such conditions that mean the buyer is unwilling to proceed (e.g. due to the staffing levels set by the Care Inspectorate), the seller may find themselves having to begin the whole process again.
Get in touch
Taking into account all of the above, it's vital that prospective sellers take advice on their options before starting the sale process.
Our healthcare team understand the sector and its complexities, and we regularly advise clients on both the corporate and regulatory aspects of buying or selling care homes. Our clients range from national operators and consolidators through to family owned businesses and sole practitioners.
If you would like to find out more about how we could help, please get in touch with a member of our team.