[DAYS_LEFT] days left of your Medeconomics free trial

Subscribe now

Your free trial has expired

Subscribe now to access Medeconomics

Business Development - GP provider federations

Ian Hempseed explains the types of companies practices can form if they decide to federate.

Although commissioning groups will be unable to provide healthcare services, the White Paper is clear that individual practices or groups of practices should have the opportunity to provide new services, where this will equate to best value in terms of quality and cost.

Teamwork
A way to maximise this opportunity is to federate (team up) with other practices to form a provider organisation. GPs will retain the freedom to choose the legal structure best suited for their federation, but commissioning consortia will need to manage any conflicts of interest.

In this two-part guide, I outline the key determinants for selecting the right legal vehicle for your federation.

For example, some federations might wish to be social enterprises, retaining all or a majority of the profits for reinvestment for the local health community.

For others, access to the NHS Pension Scheme will be a prime consideration.

Part one of this guide covers the different types of limited company. Part two next week will describe the key features of industrial and provident societies, charities and co- operatives, partnerships and limited liability partnerships.

Understand options
My aim is to help GPs understand the main differences between the options for the statutory form for your provider federation. Get detailed legal advice before making a decision.

Community interest company limited by guarantee

Key features
This is a vehicle specifically designed for social enterprises. It must satisfy a community interest test of whether a reasonable person would consider its activities benefit the community.

The company is prohibited from transferring its assets below full value (called the 'asset lock'), except to another asset-locked body (such as another community interest company or a charity) or for the community's benefit. Directors can be paid reasonable remuneration.

The key features of companies limited by guarantee (see right) also apply to community interest companies limited by guarantee.

Pros

  • Members' (owners) limited liability.
  • Reassurance to the public of the statutory asset lock.
  • Light touch regulation.
  • Able to badge itself as a statutory social enterprise.
  • Profits reinvested.

Cons

  • Cannot raise equity finance or distribute profits.
  • Members cannot benefit from any enhanced capital value.
  • Not eligible as an employing authority to access NHS Pension Scheme (except possibly as an out-of-hours provider).
  • Extra reporting requirements in the form of an annual community interest report.

 

Company limited by guarantee

Key features
A company limited by guarantee is an independent legal entity separate from its members (owners) and directors. A member's liability is limited to their guarantee (often only £1). The company is responsible for its own debts. The directors, to whom the members entrust strategy and management, must perform statutory duties.

Pros

  • Members' limited liability.
  • Profits are re-invested.
  • Generally regarded as a social enterprise model.
  • Unlike a community interest company, it does not have a statutory regulator.

Cons

  • There is no statutory asset lock.
  • It cannot raise equity finance or distribute profits.
  • Members cannot access any enhanced capital value.
  • Not eligible as an employing authority to access NHS Pension Scheme (except possibly as an out-of-hours provider).

Community interest company limited by shares

Key features
This type of company is specifically designed for social enterprises. It must satisfy a community interest test of whether a reasonable person would consider its activities benefit the community and is prohibited from transferring its assets below full value, called the 'asset lock', except to another asset-locked body (for example, another community interest company or a charity) or for the community's benefit. Directors can be paid reasonable remuneration. The key features of a company limited by shares also apply to community interest companies.

Pros

  • Shareholders' limited liability
  • The reassurance to the public of the statutory asset lock
  • Light touch regulation
  • Able to badge itself as a statutory social enterprise.
  • Can raise equity finance by issuing shares.
  • May be eligible as an employing authority to access the NHS Pension Scheme

Cons

  • Shareholders' dividend payments are capped at 35 per cent of distributable profits and a maximum per share of 20 per cent of its issue price paid to the community interest company.
  • Extra reporting requirements in the form of an annual community interest report.

Company limited by shares

Key features
A company limited by shares is an independent legal entity separate from its shareholders and directors. Shareholders can receive dividends and their liabilities are limited to the amount they should have paid on their shares when they were issued. They entrust strategy and management to the directors who must perform statutory duties. The company is responsible for its own debts.

Pros

  • Shareholders' limited liability.
  • Can raise equity finance by issuing shares.
  • All profits can be distributed to the shareholders.
  • Shareholders can benefit from any enhanced capital value.
  • The company can buy back its shares at market value.
  • It may be eligible as an employing authority to access the NHS Pension Scheme.

Cons

  • A company limited by shares is not recognised as a social enterprise although social enterprise features can be written into its articles of association or adopted by its directors as policy.
  • Ian Hempseed is a partner at specialist medical solicitors, Hempsons, www.hempsons.co.uk

Sign up to our monthly GP Commissioning bulletin and get all the latest news and analysis straight into your inbox

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Would you like to post a comment?

Please Sign in or register.