Are You Prepared to Forfeit your most Valuable Asset

For most dentists the goodwill in their practice is one of, if not the, most valuable financial assets they own. If you have an NHS contract and this is held in your sole name, it might come as a shock to discover that on your death the PCT has the right to terminate the contract after a week unless certain specific steps are taken to extend it. Even then, the extension will be for a period of only three months.

Paragraphs 63 and 65 of the third schedules to the PDS and GDS regulations respectively provide that a sole provider’s contract will terminate 7 days after the death of the contractor, unless the personal representatives of the contractor apply within that 7 day period and the PCT agree after receiving written assurances from the PRs that they are employing a dentist or dentists to perform the contract, in which case they may extend it for a 3 month period. At best, the rules provide that the PCT, if it satisfied that there is someone who might be interested in taking over the contract, can extend the contract by a further six months.

Two crucial issues arise out of these provisions.

  1. Your personal representatives need to be aware of the urgent need to deal with the PCT within 7 days and also they need specific power under your Will to continue your practice

  2. You may wish to take steps now to avoid the problem 

The first-mentioned point is both a practical and legal one, at a time when your family, who are often your personal representatives, may be in total shock and grief. They are then expected to take urgent action to deal with the technical requirements of the GDS or PDS regulations or risk the loss of possibly the biggest part of your estate. Even if they get it right, they have only three months to deal with a sale of the practice and even then, as the contracts are not assignable, there is no guarantee that the PCT will cooperate and allow the NHS contract to be transferred. 

The second point is, to an extent, an antidote to the first. 

The problem arises only in respect of contracts held by a sole provider. If therefore we could transfer the contract out of the sole provider to either joint providers or a corporate body, then the problem will be averted and the contract preserved. We have recently advised a number of dentists in relation to this problem and there are a number of scenarios that might assist. 

First, many dentists have other family members who are dentally qualified, bearing in mind that to hold a contract you no longer have to be a dentist, but simply a dentally qualified person. This could open the door to transferring the contract to a partnership between a dentist, therapist or nurse where the incoming partner need only hold a notional share of say 0.01% to ensure the continuation of the practice whilst a purchaser is found and an orderly sale negotiated. 

Whilst there are no provisions in the PDS regulations to allow partnerships, there are provisions that allow conversion of PDS to GDS and the GDS regulations allow you to take a partner or partners, so for both PDS and GDS contractors there is a route to creating a partnership to protect the contract.
Secondly, if you don’t have a family member suitably qualified to enter into a partnership and don’t wish to incorporate (or the PCT will not agree to incorporation), perhaps you might wish to consider a mutual arrangement with a trusted, dentally qualified friend or colleague who is in a similar situation. This solution would allow you each to take a nominal share in each other’s contract, purely for the purpose of preserving the contracts for your respective estates. We have recently advised a number of practices on the terms of suitable arrangements to safeguard each other’s practices. 

Another option would be to incorporate the practice and have the contract transferred to the limited company. The death of a shareholder would not result in the loss of the contract, provided the company could still comply with the rules relating to a Dental Corporate Body. 

This issue is one of paramount importance to NHS sole providers and should be addressed without delay. In order to avoid inadvertently losing your most valuable asset, and to preserve a vital part of your legacy, it is essential that you take advice from a solicitor who specialises in dental practice matters.
For more information please contact Ray Goodman on 0151 707 0090 or by email at rng@goodmangrant.co.uk


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