How to incorporate your practice
First published in Practice Management in February 2021
Justin Cumberlege, partner at specialist law firm Hempsons, looks at what you need to do to obtain consent if you want your practice to become a company
A company has always been permitted to hold a GMS contract or PMS agreement[1] but not many GP practices have formed companies. With the increase in liability caused by the network DES specification[2] some are thinking the time has come to have limited liability by forming a company.
A company is a separate legal entity, and so consent from NHS England is required to transfer a GMS contract from the partnership to the company. The usual contract variation when there is a change of partners is not possible. A deed of novation needs to be entered into between the partners, the company and NHS England whereby all the parties agree that the rights and obligations of the GMS contract are novated from the individual partners to the company.
There is no right to have the contract novated to the company. If the existing partners of the practice will be the directors and the shareholders of the company, there should not be any resistance to giving the consent provided the business case is well made.
In part this is to ensure that any grounds for a procurement challenge by other interested parties, is minimised as the contract will be awarded to a new legal entity.
NHS England has included guidance in the Primary Medical Care Policy and Guidance Manual and in December issued further detailed guidance and a tool for commissioners to follow when a request for a novation to a company is made.
The business case should address:
- a clear strategic rationale for the incorporation – if this is to address current issues, you would need to demonstrate how incorporation will help to resolve them.
- how incorporation will support the sustainability of patient services, or even better, allow for more services to be provided.
- a mobilisation plan which is robust to manage the transition to the company – the company will need to be CQC registered, registered with the Commissioner for Information, staff transferred in accordance with TUPE, and have a lease of the practice’s property among other things.
- that there will certainly not be any detriment to the quality of patient care and services delivered, and why it will benefit patients, and that the benefits are realistic and deliverable.
- The financial stability of the company – provide clarity as to how the company will be financed, without having the backing of the personal wealth of the partners behind it. It must be clear that this is not just a first step to closing the practice, by ring fencing the liabilities within the company.
Provided that you are clear as to why forming a company is beneficial for the long term sustainability of the practice, you should be able obtain the required consent, which will be a first step to implementing the transition to incorporation.
[1] Sections 93 and 86 of the National Health Service Act 2006
[2] Network Contract Directed Enhanced Service Contract specification 2020/21 – PCN Requirements and Entitlements