Asset transfer – securing major contracts
From Dr Patel, CEO
About The Medical Clinic
The Medical Clinic provides health care services through its own clinics and agreed to buy the business and assets of another similar service provider. The jewel was the Seller’s NHS contract we wanted to acquire. Our goal is to build and grow into a major health care provider and put in place new ways of delivering health care.
I had worked with Gannons in the past when I had a very difficult shareholder in another business. I was impressed by the way the team at Gannons resolved that problem that I had come to think was intractable until they rescued me. Easy to work with and in tune with the personalities was a great benefit to me and helped to achieve the good result I achieved.
Gannons were instructed to draft, negotiate and complete the agreements needed to transfer the Seller to us and in particular to novate the NHS contract.
What challenges (if any) did you face?
To transfer the NHS contract we had to square off a number of issues including:
- Inheriting staff under TUPE and harmonising them within the business.
- Inheriting business premises which were surplus to requirements.
Transfer of Employees
As the sale was the transfer of a business undertaking as a going concern, the employees currently employed in the business would automatically transfer to our client as the Buyer of the business under the Transfer of Undertakings (Protection of Employment) Regulations (TUPE). TUPE meant that the current employees transferred on the same terms of employment as they had with the Seller. The transfer includes taking with them the accrued rights they had accrued during their previous employment. This means if the employee had 4 years of continuous employment with the Seller, an employee would take that period of continuous employment across to the Buyer so that they would be treated as if they had always been employed by the Buyer. We worked with the Seller to meet with the employees and discuss their concerns to ensure that the TUPE obligations were addressed.
Our client did not have the need for all of the staff transferring from the Seller. But we knew that redundancy as a result of a TUPE transfer is automatically unfair. The risk was not unsubstantial as some of the technicians were highly paid and had long periods of service. We worked with the Seller to negotiate the terms of settlement agreements entered into between the individual employee and both the Seller and our client – we knew tri party settlement agreements would close down the risk of employment related claims and Tribunal action.
Because of the type of business that was being transferred, the approval of the Care Quality Commission (CQC) needed to be obtained. This had to be addressed in the documentation so that the appropriate regulatory requirements, approved staff, and procedures would be in place from completion. We drafted an asset sale agreement that was conditional upon regulatory approval. The benefit to our client was it committed the Seller but protected our client from the risk regulatory approval was not secured.
Transfer of the main Contract
The CQC had to agree to the transfer of the Contract to our client and be happy that, as the Buyer, our client would be able to provide the Services to the required level and at the agreed price. Equally, our client needed to be satisfied that the terms of the Contract were acceptable as the Contract was being transferred “as is”. The way this was done was by entering into a three-way Deed of Novation where the outgoing provider (the Seller), the CCG and the Buyer agreed that the Contract would transfer.
Our client intends to move the services to new premises in the same area in the near future. However, for the time being the Seller agreed that an area of their premises could be occupied and used by the Buyer. This was very convenient. We negotiated and drafted a sub-lease of the premises our client wanted to use. Along with space our Client needed the use of various services – we dealt with that by way of a managed services agreement setting out the charges, duration and level of commitment required from the Seller to maintain the services.
What would you say about working with Gannons?
The transaction completed smoothly and it up and running successfully. The team delivered on time and within the fee estimate. You can tell they know what they are doing – such a relief in what is a stressful time.