In the last of a series of articles looking at the causes of delays in pharmacy sales, Becky Lawton examines the steps pharmacy business owners can take…

There are things pharmacy owners can do in respect of staff-related matters, in advance of marketing their business for sale, which can help the due diligence process to go smoothly and minimise delays.

Audit of employment documentation

By carrying out an audit of employment documentation you can pre-emptively address many issues and avoid or minimise the delay caused by additional queries being raised by the buyer or their advisers.

The first part of such an audit is to ensure that all members of staff (whether they are employees or self-employed locums) have a written agreement with the pharmacy business which accurately documents the working relationship.

This audit process will, for example, flag any employees who for whatever reason do not have written contracts and allow you to liaise with them to remedy the position in advance of the sale. Employers are often concerned that taking such steps might put staff on notice of the potential sale; however, this remedial action can be presented as part of a general house-keeping exercise and should not unsettle the workforce or notify them of the sale.

Locum pharmacists are often relied on to supplement the existing workforce during peak periods and cover absences on an ad hoc, self-employed basis. When making due diligence enquiries of sellers, buyers will always ask about the use of locum pharmacists so owners should ensure that appropriate locum agreements are in place.

As a result of high profile employment status cases involving gig economy companies like Uber and Deliveroo, we expect buyers to be raising more queries around the employment status of locums. In September 2017, a new corporate offence of failure to prevent the criminal facilitation of tax evasion was introduced, which makes it increasingly important that pharmacy business owners manage their locum arrangements appropriately and in keeping with their self-employed status.

As part of an audit, we recommend considering whether individuals are employed or engaged on the correct basis. During the due diligence process, buyers may raise additional enquiries if they believe that a locum has become too regular a feature within the business and treated akin to an employee.

In preparing a business for sale, it will also be important to consider the policies and procedures in place for managing the workforce as these will also need to be disclosed. Ideally, staff handbooks will be non-contractual in nature and can be updated to reflect legislative changes and current best practice in advance of a sale and without the need to consult with staff to obtain their consent to the changes.

There is real value in carrying out such an audit. It can be reassuring to a buyer to review employment documentation which is well organised and up to date; it presents the business as well managed from the outset of the due diligence process.

Immigration issues

Right to work checks

If you are selling your business, it is prudent to revisit the right to work checks that you have carried out in respect of your staff because you will be asked to provide a warranty to the buyer that the company’s legal obligations in that regard have been correctly complied with. If checks have not been carried out correctly or if information has not been kept up to date, you may need to liaise with members of staff and/or the Home Office to ensure that the position is remedied.

Penalties for employing individuals who do not have the right to work in the United Kingdom have increased to up to £20,000 per employee. If there are issues with right to work checks that cannot be easily fixed during the course of a transaction, the parties may end up having to renegotiate the terms of the purchase agreement to include appropriate indemnities and/or adjust the purchase price to reflect associated risks. This can be time consuming and could lead to the completion of the transaction being delayed.

Sponsored migrant workers

In addition to right to work checks, a buyer will want to know whether the seller holds or has held a sponsor licence and whether any employees are currently sponsored by the business to work in the United Kingdom under the immigration points-based system.

Potential related obstacles to be overcome in transactions include a buyer being unwilling to apply for a sponsor licence or having previously had their sponsor licence revoked, preventing them from taking on employees who are sponsored to work in the business. Such issues have caused delays and prompted negotiations between parties about the working population that the buyer is to acquire and possible commercial workarounds.

This article was first publised in Pharmacy business on 4 June 2018.