As more groups of GPs look to start their own healthcare provider business, it is important that tailored rules of governance are put in place from the outset to protect individual business owners and minimise the risk of disputes arising.
Governance is the rules that are put in place within an entity to help direct the way in which it is managed and controlled.
Effective governance structures facilitate an entity to achieve its goals more efficiently, as well as managing risk and protecting stakeholders' rights and interests.
Each provider company will need to put in place constitutional documents which provide details of the rules of governance applicable to its management and ownership.
In the case of a company, these constitutional documents will comprise a company's memorandum and articles of association (which are publicly accessible at Companies House) and any private shareholders' agreement. For a limited liability partnership (LLP), its constitutional document comprises a private members' agreement.
Key issues covered in constitutional documents, for example in relation to a company limited by shares, include:
- Who are entitled to be the shareholders and directors of the company?
- What decisions need to be made by the shareholders, instead of the directors?
- What happens when a shareholder no longer wishes to be involved in the company - do the other shareholders have a right of first refusal in respect of the purchase of their shares?
- How are the shares to be valued?
- Can a majority of the shareholders wishing to sell their shares to a third party require the minority shareholders to also sell their shares?
- Are there any specific rules regarding extraction of profits?
- What happens in the event of a dispute between shareholders?
A provider company's constitutional documents should also confirm how conflicts of interest of the directors are to be dealt with.
If a company structure is adopted for a healthcare provider business, the directors (who are usually in day-to-day control of the business) should be aware that they will need to run the company in a way which complies with the provisions of the Companies Act 2006.
For example, some of the duties that directors owe to the company are codified in this Act, including the duty to promote the success of the company, the duty to use reasonable care, skill and diligence, and the duty to avoid conflicts of interest.
If one or more partners of a GP practice hold shares in a provider company on behalf of their GP practice partnership, ancillary amendments will also need to be made to the practice's partnership deed to reflect these arrangements.
New provider businesses which are aware of the legal framework within which their business must operate, and who have the right governance structure in place, will be best placed to take full advantage of the opportunities that are available to them within the changing healthcare landscape and generate more practice income.
- Polly Ellison is company secretary, Portal Health Cheltenham Ltd, supported by Foot Anstey LLP, Solicitors