Buying Or Selling A Care Home? – Make Sure You Consider The Legal Necessities

Buying or selling a care home requires input from specialist legal advisors to ensure that you do not fall foul of the various regulatory hurdles you will need to overcome. It is essential to ensure that you appoint lawyers who understand the health and social care regulations which apply to the sale and purchase process. If you are about to embark on a care home sale or purchase, you should carefully consider the following:

Care homes are often operated by their owners through limited companies. Therefore, you need to consider at the outset whether the transaction should be undertaken by way of a sale of the shares in the company or by way of a sale of the business and assets of the company. Much will depend on tax.
As a buyer, you would pay 0.5% stamp duty on a purchase of shares, whereas a business and asset purchase is likely to result in a greater stamp duty liability. A seller will be keen to consider the implications of things such as entrepreneurs’ relief and capital gains tax.

The buyer will need to be registered with the Care Quality Commission before they can take over the care home. This process can take several weeks and will need to be factored into the timing of the transaction. However, if the purchase will be undertaken by way of a share purchase of the seller’s company which operates the care home, the company should already be registered with the CQC. As a result, the process is easier as the buyer will not require a separate registration. The buyer will simply be stepping into the shoes of the company’s existing registration.

Local authority funding

Are any of the residents of the care home funded by the local authority? If so, as a buyer, are you familiar with the local authority’s contract with the care home? If you are buying the shares in the company which operates the care home, is there a ‘change of control’ clause in the local authority contract which needs to be addressed?

As a buyer, are you familiar with the terms and conditions of employment of the employees at the care home? Do they fit in with the terms and conditions you wish to adopt? If you are buying the business and assets of the care home, TUPE will apply.
TUPE is the Transfer of Undertakings (Protection of Employment) Regulations 2006. The purpose of TUPE is to safeguard the employment relationship and contracts of employment of employees, if the business which they are in changes from one owner to another. Both buyer and seller have several obligations to comply with under TUPE. Do you understand what those obligations are and what the consequences would be if you fail to comply?

Due Diligence
As a buyer, have you undertaken sufficient ‘due diligence’ on the care home? Have you looked at critical things such as whether the care home has a satisfactory CQC report or whether the care home has been the subject of any litigation or major investigations? Are you satisfied that the care home has been complying with regulatory requirements? As a seller, you need to make sure your ‘house is in order’ i.e. that you have to hand all the necessary paperwork which the buyer is likely to ask for.

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