Corporate lawyer James Brawn originally wrote this article for the December 2024 issue of Caring Times magazine, a publication for care managers, owners and directors, providing a guide to succession planning for family-run care home businesses.
Succession planning for your family-run care home business
While most care homes in the UK are run by large independent companies such as Bupa and HC-One, a significant minority are run by local authorities, charitable organisations and by families who may own one care home or a small group of homes. For obvious reasons, family-run care homes are often a popular choice because they are seen to provide a more bespoke and personal service than their larger, corporate counterparts. For the families that run a care home, making a difference by providing a nurturing environment for residents and building relationships with them and their wider families can be a very fulfilling experience.
If your care home is a family-run, it is important to plan and make succession plans regardless of whether your long term goal is to pass the business to the next generation or to a qualified buyer. Making plans can often prevent disputes further down the line, something which unfortunately is commonplace in family -run businesses when things have not been properly thought through or documented. Therefore, ensuring that you have open and transparent discussions with your family members about their aspirations and wishes is a key part of the process particularly when family members have competing interests. For example, some members may have a more active role than others. A well-sought out succession plan can also help secure the future of a family-run business.
An important planning step is to consider your legal structure and what agreement you need to regulate and protect the business’ interests. For instance, a partnership or LLP should have a partnership agreement which sets out what will happen if a partner decides to leave the partnership or dies. If you operate via a limited company you might need, or should have if there is more than one stakeholder, a shareholders’ agreement. As with a partnership agreement, the agreement should govern what happens when a key shareholder dies or wants to exit the venture.
Some shareholders’ agreements set out that a business partner has the option to buy your shares on death. This will help to ensure that a shareholder’s family benefit from and inherit the value in the business but it would keep the shares in the hands of those operating the business.
As well as taking advice about the corporate structure of your care home, we would also recommend that the key stakeholder reviews his or her Will with a private client solicitor to ensure that important tax breaks including Business Property Relief are utilised.
Succession planning can be complex and should always be undertaken in good time and with professional advice. As well as using the services of a corporate solicitor and a private client solicitor, we would recommend consulting an accountant, a financial adviser and possibly more experts to ensure the best result for your business and family.
Finally, we would recommend that once a succession plan is in place, it is regularly reviewed particularly when a significant business opportunity presents itself, for example, it may be that the business looks to acquire a second care home. It is also important that the plan is reviewed when important life events occur such a divorce or marriage.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.