There are several important points to think about when contemplating or preparing for the purchase or sale of a nursing home business in Ireland. Eimear Lyons, partner at Mason Hayes & Curran, a leading Irish law firm based in Dublin, outlines some of the key considerations coming up time and time again in the context of transactions in the nursing home sector.
Structure of the transaction
It is important for both the seller and the buyer of a nursing home business to discuss and agree on the ideal transaction structure as early as possible. Any tax considerations will also need to be considered. The most typical structures we see are share purchase or asset/business transfer transactions and, from time to time, a pre-sale reorganisation or restructuring. If a change in the direct ownership of the property from which the nursing home operates and/or new lease arrangements are proposed, then the structure of the property transaction will also need to be considered carefully.
Ideally the structure of the transaction should be settled before the heads of terms are agreed, and certainly before the transaction documents are prepared, as the structure will dictate many of the key provisions in the transaction documents.
A pre-sale reorganisation or restructuring, if relevant, will also influence the structure of the transaction and the completion timeline. In some cases, the buyer and its advisers will want to oversee the pre-sale reorganisation or restructuring to ensure that all the assets and liabilities, where relevant, are properly transferred to the business or company that it is acquiring. The buyer should also consider any potential reorganisation or restructuring of the target or the buyer’s group after completion so that the transaction documents allow the buyer flexibility in this regard.
Contracts of care
Contracts of care set out the relationship between residents and the nursing home and importantly outline how fees are to be collected and what options a nursing home has when a resident fails to pay. The Competition and Consumer Protection Commission (CCPC) guidelines on contracts of care for nursing homes give nursing home operators guidance on compliance with the EC (Unfair Terms in Consumer Contracts) Regulations 1995 (Unfair Terms Regulations).1
If you are preparing for the sale of a nursing home, you should carefully review the contracts of care used in the nursing home and be in a position to confirm:
- The form(s) of contract of care used in the nursing home
- Whether or not there is a signed contract of care in respect of each resident in the nursing home
- Any guarantee arrangements
In addition, if the form(s) of contract of care used in the nursing home does not comply with the CCPC guidelines, you may wish to deal with this before the matter is raised by the buyer when it carries out its due diligence exercise.
If you are a buyer, you should also carefully review the form(s) of contract of care used in the nursing home. It is important that you fully understand what options the nursing home has when a resident fails to pay and whether or not the form(s) of contract of care is compliant with CCPC guidelines.
Health Information and Quality Authority (HIQA)
An operator cannot operate a nursing home unless the nursing home is registered with HIQA and HIQA has registered the operator as the registered provider of the nursing home. The sale and purchase of a nursing home often triggers statutory notifications to HIQA. In some instances, the sale or purchase of a nursing home will require the buyer to file a new application with HIQA to be registered as a provider of the nursing home. All statutory notifications or applications should be carefully considered by both the buyer and the seller as the timing of any notifications and applications will need to be considered in terms of the transaction structure and timelines.
The General Data Protection Regulations (GPDR) are the EU’s data protection laws which regulate “processing” of personal data. Processing is essentially any action in relation to personal data and includes collecting, sharing, deleting, amending, storing or viewing data and each processing activity must comply with the rules of the GDPR. In nursing homes, the collection or use of personal data, whether it be residents’ or employees’ data, is inevitable. Therefore, GDPR is a key issue to be considered by a seller and a buyer.
If you are preparing for the sale of a nursing home, you should consider the following:
- Determine what information constitutes personal data and consider if the processing of this personal data, e.g. uploading it to a data room, is outweighed by the rights and interests of the relevant individuals
- Put in place a robust non-disclosure agreement and data room rules which specifically deal with the use of personal data by a potential buyer and its advisers
- Redact or anonymise any personal data before it is shared with a potential buyer or its advisers. Take particular care with sensitive information such as medical records
If you are preparing to buy a nursing home, you should consider the following:
- Review the non-disclosure agreement and the data room rules to make sure you, your teams and advisers are aware of your respective obligations regarding personal data and that the rules are not too onerous
- Securely store any data received from the seller or its advisers
- As part of your due diligence process, assess the seller’s compliance with data protection law in respect of existing policies and practises in place in the nursing home. You may also consider implementing new policies to replace any deficient policies post-completion
- Post-completion, carry out a review of all information and personal data held by the nursing home and decide what needs to be deleted and what can be kept and for how long it can be kept
Both the buyer and seller of a nursing home business should carefully consider how best to structure the transaction and any tax considerations as early as possible, and before preparing any draft documentation.
Where a pre-sale reorganisation or restructuring is envisaged, the process around this should be agreed as early as possible. Also, the buyer should consider whether it requires any flexibility in the transaction documents in terms of any post-completion reorganisation or restructuring of the target or the buyer or its group
Personal data of the residents and employees of a nursing home must be handled with great care by the seller and the buyer, and their advisers, during the due diligence process. Where appropriate, there should be robust non-disclosure agreements and rules around data sharing, particularly when using electronic data rooms
Contracts of care in place in the nursing home should be reviewed to ensure they are compliant with the CCPC’s guidelines and payment provisions are clear
Both the buyer and the seller should be aware that a nursing home transaction in Ireland will likely result in a mandatory notification or application to HIQA and allow enough time in the transaction timeline to deal with any such notification or application
1 Contracts of Care – Refresher on CCPC Guidelines https://www.mhc.ie/latest/insights/contracts-of-care-refresher-on-ccpc-guidelines