Dental Practice Governance: The Basics
Key Contact: John Grant
Author: Ben Edwards
A limited company that carries on the business of dentistry (legalese for “owns a dental practice”) is what is known as a dental body corporate (DBC).
DBCs: A history
Dentistry has been practiced by companies in the UK for over a century, allowing the profession to benefit from the laws of limited liability and to encourage investors. However, many of the earliest dental companies were unregistered, which often led to extensive malpractice and concerns about the potential conflict between commercial interests and professional care.
These concerns eventually resulted in strict measures being put in place by the government in the 1950s to restrict corporate practice.
In 2006, with the support of the British Dental Association, some of these measures were lifted in an effort to increase competition and choice, and to allow for the expansion of the dental market to the strength we see today.
How are DBCs governed?
In addition to corporate legislation such as the Companies Act 2006, DBCs are governed by The Dentists Act 1984 (1984 Act), which sets out the various business structures that can own and operate a dental practice.
While there is no requirement to seek consent from the General Dental Council to trade as a DBC, any corporate body can carry out the business of dentistry provided that it can satisfy one significant condition.
The structure of a DBC’s board of directors
DBCs must prove they are fit for clinical purpose by ensuring their board of directors is correctly structured.
This means ensuring that at least half of the directors of a DBC are either registered dentists or registered dental care professionals to remain compliant with the 1984 Act.
If there is an instance arises where a majority of directors on the board of a DBC are not registered dentists or registered dental care professionals, then the DBC is guilty of a criminal offence. The repercussions of a DBC committing an offence under the 1984 Act could mean a fine of up to £5,000.
However, the ramifications of a breach of this nature would not end with the simple fine. Practice insurance premiums are likely to increase for fear of a further breach in the future. Also, if there is an NHS contract in place at the practice in which the contractor confirms that they are compliant with the 1984 Act, upon discovery that they are, in fact not, the NHS will terminate the contract with potentially disastrous consequences for the practice owner. The situation could be rectified by the owner proposing to practice, for example, as a sole trader. However, this would not be a quick change, and could lead to the practice losing a vast number of its patient base if the contract were to go out on competitive tender, because the NHS provides no assurances that the existing contractor would be successful in winning the new contract on the same terms as it was originally granted.
Furthermore, a history of the breach will remain a black spot on the practice, which will be particularly relevant if and when the DBC is looking to sell. The breach will be evident at the due diligence stage of the transaction, and the seller will have to disclose and support the buyer’s enquiries into this area. This could have a negative effect for potential buyers, who might fear becoming liable for such breaches if they were not actioned at the outset; but also face delays in the due diligence timeline while a buyer conducts their investigations. Potential buyers might opt to purchase the practice via an asset transaction rather than a share transaction, in order to reduce their liability and the likelihood of the breach coming back to haunt them.
For help with ensuring your dental practice is compliant with The Dentists Act 1984, contact our Corporate Healthcare team.
