The effect of CQC registrations on dental transactions – Dentistry Magazine
Published in Dentistry magazine 07.07.11 www.dentistry.co.uk
Dentists will, by now, be more than familiar with the Care Quality Commission (“CQC”) registration process. However, they may not be aware of the impact that this could have in relation to the sale or purchase of a dental practice. The position is not yet certain as there is no official guidance on this issue on the CQC website but a recent development has provided a welcome and pragmatic solution.
The first issue that CQC grappled with was whether a partnership, formed purely to effect the transfer of a GDS contract from the seller to the buyer of a dental practice, would need to register as, in theory, it will be the performer for a limited period of time. Thankfully, CQC clarified that these temporary partnerships do not have to be registered with them on the basis that there is no intention of creating a partnership in the long term.
When considering the transition between buyer and seller in a sale, CQC originally advised that the incoming provider (ie the buyer) should, in submitting an application for registration, also advise the CQC of the date the registration should start (ie the intended date of completion of the purchase). However, CQC then made it clear that it can take 120 days to complete a registration! Although they indicated that they will endeavour to complete the application sooner if an earlier date is requested, this cannot be guaranteed and they reserve the right to place conditions on registration or refuse registration outright in exceptional circumstances.
As a footnote, they made it clear that the currently registered dentist will continue to bear all responsibility for ensuring that the conditions of registration are met and all central standards are maintained until the incoming dentist registration is complete and they have cancelled their own registration.
This would have had a significant impact on the timing of dental sales and purchases as the buyer would not want to submit an application for registration until they had certainty that the sale will take place and, equally, the seller would want to cancel his or her registration with effect from completion of the sale. The only way to deal with this was for the buyer and seller to exchange contracts (thereby becoming legally obliged to buy and sell the practice) but with completion of the transaction (ie the point at which legal ownership of the practice passes from the seller to the buyer) only taking place once CQC registration for the buyer was issued. This could have involved a gap between exchange and completion of up to four months, which is an exceptionally long gap in the context of these transactions.
However, only last week a meeting was held between representatives of the CQC, the lending institutions and a number of specialist dental legal practitioners. The outcome of that meeting has provided the following guidance (although this does not yet appear as published guidance on the CQC website):
- CQC have confirmed that they will not register anyone who is not yet an owner of a practice.
- Buyers are to carry out their CRB checks, obtain their references and submit their applications for registration at the proposed practice as soon as possible (i.e. before exchange) and the application should advise of the proposed completion date.
- Once completion is imminent, both Seller and Buyer should notify the proposed completion date to CQC and, at that point, CQC will issue a comfort letter confirming that completion may take place without the Buyer being registered.
- Once completion has taken place, the CQC registration will be finalised by way of deregistration of the seller and registration of the buyer.
We understand that the issue of the comfort letter by CQC will be acceptable to banks providing acquisition finance and that they will advance the funds on the basis of the comfort letter to enable completion to take place prior to actual registration of the buyer with CQC.
CQC must be commended for this useful, welcome and pragmatic development as it will enable transactions to complete within normal timescales. The key message for buyers is to ensure that CQC applications for registration are submitted as soon as the key terms of a sale have been agreed and there is any certainty that the transaction will proceed.