Australasian Dentist Issue 93

CATEGORY 128 AUSTRALASIAN DENTIST L AL By Julian Whitehead Is your exit strategy ready? Julian Whitehead T he old adage on the construction of your house is all about getting your foundations right or you can be in strife! Your dental practice foundations are no different and are fundamental to your exit strategy. Before you even consider an exit strategy, consider if your foundations are going to be exposed. What legal foundations are fundamental to your practice? There are a few fundamental areas that need to be considered, before you consider your exit strategy. What is the status of your lease? Any prospective purchaser and its financier needs (at a minimum) lengthy premises tenure to secure finance – some like to see a minimum of 10 years remaining on your lease. Do you have any sub-leases or license arrangements with occasional specialist practitioners? Are they in writing? Are these sub-lease/licence arrangements critical to the value of your practice? Does their tenure align with your lease’s tenure? Your lease provides for permitted usage. A prudent purchaser will ask for evidence that you (and your dentists) have an unfettered right to practise dentistry at the premises. If you cannot provide such evidence, your purchaser will need to consider taking on a commercial risk which may not be attractive. Ensure your premises usage is satisfactory for your current amount of practitioners practising at any one time and that there are no contraventions of any permits or council ordinances. If you do not currently have appropriate lease tenure, or your sub- lease/licence arrangements that are critical to your practice value are inadequately documented or your permitted usage is currently contravened, it may be prudent to liaise directly with your landlord to negotiate a lease/sub-lease/licence variations and the council to improve your permitted usage to provide prospective purchasers the security they seek (rather than have your entire exit strategy subject to your landlord’s/council’s approval). How are your employees engaged? Your purchaser will need to know early the status of your employees and their terms of employment and entitlements. Make sure your practice records are ready for an inquisition on your employees. Employment law and FairWork is a vexed and underappreciated element of your exit strategy and is consistently misunderstood within the industry. What is the status of your employees’ long service leave, personal leave, annual leave, etc? Are you paying your staff above award rates? Do you have written employment agreements? Do your employment agreements correlate with the employees’ current arrangements? Have they been updated recently in line with case law and FairWork? It is prudent to review with Whitehead Legal your employee documentation and arrangements annually! How are your professional dentists engaged? Your purchaser will need to know early the status of your dentists, whether they have signed agreements and their terms of engagement and entitlements (if any). Assistant dentists’ arrangements should be in writing and, if they are not, it would be prudent to rectify this status prior to planning your exit. Your purchaser could require your professional dentists to be formally engaged as a condition precedent to settlement (which will be commercially detrimental to you if your dentists refuse to co-operate). If you are in a partner/shareholder relationship and you do not have a partner/ shareholder agreement, consider entering into an agreement prior to your exit. For instance, without a shareholder agreement, guidance for shareholders is then directed to the company’s constitution that may not necessarily be prepared with a dental purview, but a generic business view. So, when you are considering selling, your pre- emptive rights for your shares arenot guided with a dental purview either. At settlement, your existing partner/shareholder and your purchaser will likely require a re-freshened partner/shareholder agreement – best to set up this foundation agreement now, rather than have your entire exit strategy subject to the finalization of a further partner/shareholder agreement between your existing partner/shareholder and the purchaser. So, without properly considering your practice fundamentals, is your exit strategy conditional upon other people making critical decisions? Yes, the lease, your dentists and non- professional employees and your partners/ shareholders are critical to your exit strategy.They can also be problematic if you have not given early consideration to their fundamental nature prior to considering your exit strategy. Take control of your exit strategy by first investing in proper legal foundations with Whitehead Legal. We rectify any exposed foundational issues which results in fewer surprises during your exit process thereby increasing potential buyers’ confidence. This will hopefully increase the quality of bids for your practice and streamline the process from when you plan your exit strategy to settlement. Our Whitehead Legal Foundation to Sale Compliance Checks should not only discover any issues, but also assist and manage solutions to any issues. u Julian can be contacted on 0411 406 151 or via email julian@whiteheadlegal.com.au or visit whiteheadlegal.com.au. Don’t forget to listen to The Health Lawyer Podcast with Julian Whitehead. JulianWhitehead is a partner at Whitehead Legal and he exclusively advises health care professionals in their commercial matters throughout Australia. Julian has recently implemented an integrated subscriber-based employment law/HR management platform that is actually managed by health lawyers via Whitehead Legal’s website and a managed Studio of Solutions.