Selling a pharmacy or restructuring ownership interests in a pharmacy can be a complex process. The pharmacy industry is highly regulated which requires a variety of unique processes and steps specific to pharmacy business transactions.
Here are 8 points you need to consider when selling your pharmacy:
1. Does the contract protect your interests
Contracts for the sale of a pharmacy will involve a negotiation of the terms between you and the buyer. You should ensure the contract is tailored specifically to your particular business and seek advice on whether the restraint clause preventing you from competing with the buyer is reasonable.
2. What is included in the sale
To avoid any disputes prior to settlement, the equipment included in the sale should be listed in the contract. Any items not part of the sale must be specifically excluded to protect your entitlement to them. If stock is included in the sale, there should be a contract condition regarding a fair stocktake procedure. Any trade marks or business names which are to be transferred to the buyer must be correctly registered and also listed in the contract.
3. What are the transfer of lease requirements
If you lease the premises where the business is conducted, contracts are often conditional upon the buyer entering into a lease with the landlord. The landlord will have specific requirements for the lease to be assigned to the purchaser or surrendered. Any bond or bank guarantee provided to the landlord will also need to be returned to you.
4. Consider the fines for failing to comply with Government regulations
There are severe penalties and significant fines for not adhering to legislative rules surrounding pharmacy business transactions. This would include failing to comply with the relevant license and permit requirements, and not meeting precedent conditions in the contract.
5. Franchisor consent may be required
If your business is a franchise, consent from the franchisor will need to be obtained prior to the settlement date. Franchise agreements should be reviewed for the franchisor’s requirements, such as transfer fees, for the transfer of the business to the new owner.
6. What are the Employee obligations
Depending on the terms of the business sale contract and the employment agreements in place, you may be responsible for redundancy payments if any employees choose not to continue with the buyer. For any employees who wish to continue employment with the buyer, you may be required to pay a portion of their accrued leave entitlements.
7. What warranties have you given in the contract
The standard contract terms include several warranties that you give the buyer, and if any are incorrect you may be at risk of losing the sale. Warranties include that all plant and equipment will be in working order at settlement, you will not sell any stock under the retail price before settlement, and there are no notices or orders in relation to the business from any authorities. Some warranties may need to be removed or adapted to suit your particular circumstances.
8. What documents you must provide at settlement
You will be required to provide the buyer with a list of items at settlement. This may include releases of registered securities, business name and trade mark transfers, assignments or surrenders of lease and transfers for any included vehicles. You should be aware that some of these items may take time to arrange with the relevant authorities.
About Lauren Black
Lauren Black is a Solicitor in the Property and Business teams at Plastiras Lawyers. Lauren has a particular interest in helping pharmacists with the sale and purchase of the pharmacy businesses. Lauren also assists clients with property sales and acquisitions, including commercial and residential premises.