Having an exit strategy or succession plan for your business is essential, particularly for those operating within the health and social care sector. Whether it’s a veterinary practice, pharmacy or care provider you need to make sure that you have a clear plan in place so that when the time comes you can ensure a straightforward exit with minimal disruption to both you and your business.
In this article we discuss what your options are and some of the key legal aspects to be aware of.
What is succession planning and what are the benefits?
Succession planning is the process of deciding what will happen to your business in the future and making sure that your business continues to operate when a significant change occurs – such as when an owner wishes to exit.
Succession planning also allows you and your business to prepare for the unexpected and provides you with more clarity surrounding any retirement plans.
We recommend having a succession plan in mind whether or not you are considering an exit. The plan can be updated and adapted as circumstances change but also allows all interested parties to understand the intentions of others and set out mechanisms to allow for a straightforward exit.
What are your options?
Whether you’re a sole trader, own a company or are a partner in a partnership, you can create a path for exit by either:
- Introducing key personnel to take over the ownership structure
- If the business is held jointly with others, transferring your interest to the other parties
- Finding an unrelated third party who is willing to acquire the business – whether in whole or in parts
- Winding the business up.
The most common way a business is owned is through a limited company or a partnership. Companies and partnerships are two very distinct legal entities and, whilst the end result will be the same, there are different legal processes you must go through to achieve an exit. We would always recommend that you engage legal advisors early on in the process, even if you are not considering an exit, so they can ensure that the steps are in place once you are ready.
If you own the business through a company, it’s important to ensure that the provisions set out in the articles of association, and any shareholders or investment agreement, are adhered to when it comes to transferring your interest – whether to another member or to a third party.
Similarly, if you are in partnership with others, you need to ensure that the steps set out in a partnership agreement are adhered to with any transfer. This will be particularly crucial if you own the business with others and are looking to transfer your interest to a third party.
If you don’t have in place bespoke articles of association or shareholders agreement (in the case of a company) or a partnership agreement (in the case of a partnership), but know that you will be looking to exit in the coming years, you should consider putting these in place now.
Whichever way you look to exit, you will need to consider the tax treatment of such disposal. Our Health and Social Care team work closely with a number of specialist tax advisors and always strive to get clear tax advice for our clients at the outset so we can ensure the structure of any transaction is right in terms of your tax treatment.
If you are looking to sell to a third party, the process can seem daunting but is something that our team can support you on throughout every stage.
If you would like any further information on exit strategies, please do not hesitate to contact a member of our Health and Social Care team.