things I have done and seen
57 white water rafting
58 London, England
59 a weekend on a boat house
60 Florence, Italy
61 spending a day with Gordie Howe
62 preparing a power point presentation
63 Geneva, Switzerland and Lake Geneva Wisconsin
64 being the only passenger on a Piper Navaho
65 one bar mitzvah, two bar mitzvah, three bar mitzvah
66 a henna tattoo “born to sue”
67 Oslo, Norway
68 cross country skiing
69 ’ 65 triumph spitfire
70 14 weddings in 11 months
71 helicopters landing on a ship
72 Hamburg, Germany
73 go karting
74 a magic trick that works
75 Costa Rica
76 rollerblading
77 ’ 68 mustang and an 8 track tape deck
78 Paris, France
79 gondola ride
80 a convocation speech on two hours notice
Comment of the Day
The issue of the day is the same old same old. For those of you who have not yet been educated on the principle of DEJA MOO -- think of Déjà Vu (as in, I think I have done or seen this before). In the case of Deja Moo – it is -- I have heard or seen this “BS” before.
That being the case, how many times do doctors have to be told to watch what goes on in their offices. If it is the doctor/owner – make sure that what leaves the office is correct. The proverbial “buck” stops at your desk. The latest case involves what might be a fraud on the part of an associate who is providing insurance claims for services that have not been rendered in order to provide the patient with free uninsured services. While the owner did not conduct the fraud – if it is his or her name on the receipts then the issue is very problematic.
If is a case of the associate not knowing what is going on in an office and finding out that the owner whether a doctor or non-professional owner is providing inappropriate billings then the associate must take immediate steps to ensure that they demand that the appropriate billings be rectified and to most likely terminate his or her relationship with the clinic.
In any event, “when you sleep with dogs, you will surely wake up with fleas.”
That being the case, how many times do doctors have to be told to watch what goes on in their offices. If it is the doctor/owner – make sure that what leaves the office is correct. The proverbial “buck” stops at your desk. The latest case involves what might be a fraud on the part of an associate who is providing insurance claims for services that have not been rendered in order to provide the patient with free uninsured services. While the owner did not conduct the fraud – if it is his or her name on the receipts then the issue is very problematic.
If is a case of the associate not knowing what is going on in an office and finding out that the owner whether a doctor or non-professional owner is providing inappropriate billings then the associate must take immediate steps to ensure that they demand that the appropriate billings be rectified and to most likely terminate his or her relationship with the clinic.
In any event, “when you sleep with dogs, you will surely wake up with fleas.”
Purchase and Sale -- the end
After having done all that there is to determine whether a purchase or sale should take place, it is important that the parties ensure that the completion of the transaction is closed in accordance to professional responsibilities (whatever chiropractic rules, regulations, standards, laws apply) and in accordance with the usual and customary business practices.
There are procedures for completion of a transaction, and having regard to the number of parties involved in a purchase and sale, the closing must take place with the assistance of a lawyer. For a vendor, the work for closing can involve:
contacting the landlord
dealing with the landlord's lawyer
preparation of an assignment of lease
preparation of a bulk sales declaration
preparation of a bill of sale
preparation of undertakings to do certain things after closing
preparation of the statement of various adjustments relating to prepaid costs
preparation of a non-competition and/or non-solicitation agreement
acknowledgment by the employees
dealing with any bank financing.
dealing with any equipment leases
dealing with telephone and websites
attending to the signing of the documentation
forwarding the documentation, receiving and disbursing funds
etc. etc. etc.
For the purchaser, the lawyer will deal with:
searches for liens, etc.
preparation of the affidavit relating to the bulk sales
reviewing the lease and documentation
dealing with bank financing
reviewing the closing documentation
receiving and disbursing funds
filing the closing documentation
etc etc etc.
When all is said and done, at the end of the day, the parties should both be satisfied that the practice has been properly transferred from the vendor to purchaser. It is in the interests of all of the parties to ensure that the transfer of the practice has been done in a proper fashion. This includes not only the vendor and the purchaser, but the patients, employees, and the profession because a proper transfer of a practice is important to the integrity of the profession.
So whether you are starting into a new venture and buying a practice or retiring from practice, good luck and congratulations.
There are procedures for completion of a transaction, and having regard to the number of parties involved in a purchase and sale, the closing must take place with the assistance of a lawyer. For a vendor, the work for closing can involve:
contacting the landlord
dealing with the landlord's lawyer
preparation of an assignment of lease
preparation of a bulk sales declaration
preparation of a bill of sale
preparation of undertakings to do certain things after closing
preparation of the statement of various adjustments relating to prepaid costs
preparation of a non-competition and/or non-solicitation agreement
acknowledgment by the employees
dealing with any bank financing.
dealing with any equipment leases
dealing with telephone and websites
attending to the signing of the documentation
forwarding the documentation, receiving and disbursing funds
etc. etc. etc.
For the purchaser, the lawyer will deal with:
searches for liens, etc.
preparation of the affidavit relating to the bulk sales
reviewing the lease and documentation
dealing with bank financing
reviewing the closing documentation
receiving and disbursing funds
filing the closing documentation
etc etc etc.
When all is said and done, at the end of the day, the parties should both be satisfied that the practice has been properly transferred from the vendor to purchaser. It is in the interests of all of the parties to ensure that the transfer of the practice has been done in a proper fashion. This includes not only the vendor and the purchaser, but the patients, employees, and the profession because a proper transfer of a practice is important to the integrity of the profession.
So whether you are starting into a new venture and buying a practice or retiring from practice, good luck and congratulations.
More things I have done and glad to have done them.
excuse the spelling!
41. Las Vegas – but not too often
42. Cliffs of Dover
43. measuring once and having to cut twice
44. watching Les Miserables more than once; more than twice
45. Midnight Mass
46. a cigar and a hammock
47. dancing the hustle 25 years later
48. walking a dog
49. reading Freakanomics
50. singing along to the 60’s and 70’s
51. singing the Canadian and American national anthems when you don’t have to
52. the Rock of Gibraltor from the deck of a ship
53. Law and Order episodes
54. being silly
55. making someone laugh
56. singing Danny Boy
41. Las Vegas – but not too often
42. Cliffs of Dover
43. measuring once and having to cut twice
44. watching Les Miserables more than once; more than twice
45. Midnight Mass
46. a cigar and a hammock
47. dancing the hustle 25 years later
48. walking a dog
49. reading Freakanomics
50. singing along to the 60’s and 70’s
51. singing the Canadian and American national anthems when you don’t have to
52. the Rock of Gibraltor from the deck of a ship
53. Law and Order episodes
54. being silly
55. making someone laugh
56. singing Danny Boy
Purchase and Sale - Posting 13 - second to last
7. The Agreement should be subject to, and completed in accordance with, the "bulk sales" legislation of the jurisdiction in which the transaction is completed. This legislation requires that the Vendor complete a statutory declaration indicating that there are no secured or unsecured creditors of the "business". If the creditors are not satisfied at the closing of the transaction and the declaration is not provided on closing, the transaction may be set aside by the creditors of the practice and the Purchaser may find herself or himself in the position of having to deal with the prior debts of the Vendor.
8. The purchaser will likely expect the Vendor to represent and warrant that the clinic premises are zoned for usage as health care facilities and, in addition, that there are no notices of municipal deficiencies or outstanding work orders affecting the said clinic premises and its uses which might affect the ability of the Purchaser to carry on practice at the clinic premises.
9. Since the purchase price is inevitably established based upon billings of the practice as sustainable after the closing, the Purchaser requirement to complete the transaction is generally conditional upon the Vendor having continued to operate the practice in a normal and customary fashion from the execution of the Agreement until closing. In addition, the Parties generally agree that at the time of closing there will not be any issues outstanding which would affect the Purchaser's ability to maintain the practice in its usual and customary operation. The Purchaser may also require that the Vendor maintain office supplies in the normal and customary quantity for the operation of the Vendor=s practice until the closing date.
10. An Agreement usually provides that the Parties will be liable for and shall pay all federal and provincial sales taxes which may be their respective responsibility in connection with the transfer of the purchased assets by the Vendor to the Purchaser. Subject to any legislative amendment, the purchase of a chiropractic practice is not generally subject to G.S.T.
11. The preparation of the documents necessary to transfer title to the assets are usually prepared by the Vendor at his or her own expense. In addition, it will be expected by the Purchaser that the Vendor will on the day of closing provide a statutory declaration confirming the representations and warranties contained in this Agreement. The completion of the documentation is crucial to ensuring that the Parties fully understand their rights and obligations, and in particular, the terms relating to the non-competition and non-solicitation agreements.
12. If there are any outstanding obligations to be taken care of by the Purchaser and/or Vendor an undertaking to complete the obligations will be required to be executed by the relevant party prior to the completion of the transaction. Undertakings might include the registration of a release of any lien on any of the assets being transferred to the Purchaser together with the payment of any final accounts owed by the Vendor such as utility payments, or accounts.
13. As part of the transfer of the practice, the Purchaser will acquire all of the interest of the Vendor in the name of the Clinic and the Purchaser will generally be entitled to use the present name of the Clinic. In order to facilitate the transfer of the name, the Vendor will file a notice of discontinuance of the business name for the location of the Clinic with the appropriate government registry. In the case of a Vendor who is using his or her personal name as the practice name, the Purchaser should ensure that he or she conforms to the regulatory boards requirements relating to the use of a name other than that of a practitioner. As an example, while it may be acceptable for Dr. Jones to carry on practice as Main Street Chiropractic Clinic it may be improper for Dr. Jones to carry on practice as Smith Chiropractic Clinic. It is imperative, and may be a statutory requirement of the province or state in which the practice is located, to register the name of the practice after the acquisition of the practice.
14. The parties will usually acknowledge in the agreement that there are no representations, warranties, collateral agreements or conditions affecting the agreement other than those which are set out in the agreement. As such, it is important that the parties address any representations which they may find necessary such as representations relating to the operation of the practice. It is by virtue of this provision that the expression "caveat emptor" or "let the buyer beware" becomes a crucial part of the transaction.
15. If the premises in which the practice is located is the subject of a lease arrangement, the vendor will be required to provide the consent of the landlord to an assignment of the lease for the premises, together with an acknowledgement by the landlord that the lease is in good standing.
16. The purchaser may request that he or she be allowed, after the execution of the agreement, to attend at the premises to observe the vendor in all aspect of the practice. The vendor will want to ensure that any observation by the purchaser will not in any way whatsoever impede the vendor in practice or the goodwill of the practice. In some cases, the vendor may not want the purchaser attending at the premises until all conditions have been satisfied or waived by the parties. It would appear that this would be a prudent act since any attendance by a purchaser can be disruptive in some fashion to the practice. In the event that the conditions are not met and the transaction is aborted, and a subsequent purchaser must be found, the environment of the practice may be interfered with in a detrimental fashion. It would therefore be prudent to ensure that a sale of a practice not become a matter of public knowledge until the completion of the transaction is assured and imminent.
It will generally be a term of the agreement that the vendor will, at the time of closing, terminate all employees of the practice. The vendor will be required to pay all compensation to which the employees will be entitled to the date of closing including salaries, statutory deductions and vacation pay. The vendor will be required to substantiate to the purchaser that the monies have been paid to the employees. The purchaser will acknowledge that he or she will be a successor employer to the business being acquired herein. The implication of a "successor business" is that the employees are deemed to have commenced their employment from the day they started working at the clinic. This issue can be problematic if the employee had been at the clinic for example for a period of 5 years prior to the transfer of the practice. If the employee is terminated without cause by the purchaser one year after closing, the employee might claim entitlement to compensation for an amount resulting from six years of employment. It is unlikely that the purchaser will be able to overcome this predicament and as a result the purchaser should ensure that he or she is satisfied with any employee who will be remaining with the practice.
In addition, the purchaser will require that the vendor will provide on closing an acknowledgement by the employees that they have no outstanding issues in existence with the vendor or purchaser for which any action might be taken with respect to their past or continued employment at the Clinic. Finally, the vendor will agree to be responsible for all compensation that might otherwise be payable to the date of closing and will, on closing, provide to the purchaser an indemnification with respect to any compensation which may be required to be paid by the purchaser after closing for matters arising prior to closing. Again, this may not, however, be enough to deal with a claim for compensation relating to wrongful dismiss for a period of time prior to the purchase of the practice.
8. The purchaser will likely expect the Vendor to represent and warrant that the clinic premises are zoned for usage as health care facilities and, in addition, that there are no notices of municipal deficiencies or outstanding work orders affecting the said clinic premises and its uses which might affect the ability of the Purchaser to carry on practice at the clinic premises.
9. Since the purchase price is inevitably established based upon billings of the practice as sustainable after the closing, the Purchaser requirement to complete the transaction is generally conditional upon the Vendor having continued to operate the practice in a normal and customary fashion from the execution of the Agreement until closing. In addition, the Parties generally agree that at the time of closing there will not be any issues outstanding which would affect the Purchaser's ability to maintain the practice in its usual and customary operation. The Purchaser may also require that the Vendor maintain office supplies in the normal and customary quantity for the operation of the Vendor=s practice until the closing date.
10. An Agreement usually provides that the Parties will be liable for and shall pay all federal and provincial sales taxes which may be their respective responsibility in connection with the transfer of the purchased assets by the Vendor to the Purchaser. Subject to any legislative amendment, the purchase of a chiropractic practice is not generally subject to G.S.T.
11. The preparation of the documents necessary to transfer title to the assets are usually prepared by the Vendor at his or her own expense. In addition, it will be expected by the Purchaser that the Vendor will on the day of closing provide a statutory declaration confirming the representations and warranties contained in this Agreement. The completion of the documentation is crucial to ensuring that the Parties fully understand their rights and obligations, and in particular, the terms relating to the non-competition and non-solicitation agreements.
12. If there are any outstanding obligations to be taken care of by the Purchaser and/or Vendor an undertaking to complete the obligations will be required to be executed by the relevant party prior to the completion of the transaction. Undertakings might include the registration of a release of any lien on any of the assets being transferred to the Purchaser together with the payment of any final accounts owed by the Vendor such as utility payments, or accounts.
13. As part of the transfer of the practice, the Purchaser will acquire all of the interest of the Vendor in the name of the Clinic and the Purchaser will generally be entitled to use the present name of the Clinic. In order to facilitate the transfer of the name, the Vendor will file a notice of discontinuance of the business name for the location of the Clinic with the appropriate government registry. In the case of a Vendor who is using his or her personal name as the practice name, the Purchaser should ensure that he or she conforms to the regulatory boards requirements relating to the use of a name other than that of a practitioner. As an example, while it may be acceptable for Dr. Jones to carry on practice as Main Street Chiropractic Clinic it may be improper for Dr. Jones to carry on practice as Smith Chiropractic Clinic. It is imperative, and may be a statutory requirement of the province or state in which the practice is located, to register the name of the practice after the acquisition of the practice.
14. The parties will usually acknowledge in the agreement that there are no representations, warranties, collateral agreements or conditions affecting the agreement other than those which are set out in the agreement. As such, it is important that the parties address any representations which they may find necessary such as representations relating to the operation of the practice. It is by virtue of this provision that the expression "caveat emptor" or "let the buyer beware" becomes a crucial part of the transaction.
15. If the premises in which the practice is located is the subject of a lease arrangement, the vendor will be required to provide the consent of the landlord to an assignment of the lease for the premises, together with an acknowledgement by the landlord that the lease is in good standing.
16. The purchaser may request that he or she be allowed, after the execution of the agreement, to attend at the premises to observe the vendor in all aspect of the practice. The vendor will want to ensure that any observation by the purchaser will not in any way whatsoever impede the vendor in practice or the goodwill of the practice. In some cases, the vendor may not want the purchaser attending at the premises until all conditions have been satisfied or waived by the parties. It would appear that this would be a prudent act since any attendance by a purchaser can be disruptive in some fashion to the practice. In the event that the conditions are not met and the transaction is aborted, and a subsequent purchaser must be found, the environment of the practice may be interfered with in a detrimental fashion. It would therefore be prudent to ensure that a sale of a practice not become a matter of public knowledge until the completion of the transaction is assured and imminent.
It will generally be a term of the agreement that the vendor will, at the time of closing, terminate all employees of the practice. The vendor will be required to pay all compensation to which the employees will be entitled to the date of closing including salaries, statutory deductions and vacation pay. The vendor will be required to substantiate to the purchaser that the monies have been paid to the employees. The purchaser will acknowledge that he or she will be a successor employer to the business being acquired herein. The implication of a "successor business" is that the employees are deemed to have commenced their employment from the day they started working at the clinic. This issue can be problematic if the employee had been at the clinic for example for a period of 5 years prior to the transfer of the practice. If the employee is terminated without cause by the purchaser one year after closing, the employee might claim entitlement to compensation for an amount resulting from six years of employment. It is unlikely that the purchaser will be able to overcome this predicament and as a result the purchaser should ensure that he or she is satisfied with any employee who will be remaining with the practice.
In addition, the purchaser will require that the vendor will provide on closing an acknowledgement by the employees that they have no outstanding issues in existence with the vendor or purchaser for which any action might be taken with respect to their past or continued employment at the Clinic. Finally, the vendor will agree to be responsible for all compensation that might otherwise be payable to the date of closing and will, on closing, provide to the purchaser an indemnification with respect to any compensation which may be required to be paid by the purchaser after closing for matters arising prior to closing. Again, this may not, however, be enough to deal with a claim for compensation relating to wrongful dismiss for a period of time prior to the purchase of the practice.
Purchase and Sale - Posting 12
AF: Having concluded the discussion on the "value of a practice", the issues concerning the sale and purchase of a professional practice left to be dealt with involve the following:
6. the terms of the Agreement
7. the execution of the Agreement
8. the completion of a due diligence investigation of a practice
9. the completion of the transaction
10. issues arising after the completion of the transaction
TERMS OF THE AGREEMENT:
We have already reviewed the parties to the Agreement; the price to be paid for the practice; and the assets to be included in the transaction. The following are some of the additional provisions that are customarily dealt with in the sale and purchase of a chiropractic practice.
1. Deposits: Obviously the Vendor will desire a large deposit and the Purchaser will want to pay a minimum deposit. It may be appropriate for multiple deposits to be paid as in the case of a certain amount paid with the execution of the Agreement with a further deposit paid after the expiration of any conditions contained in the Agreement which result in their being a firm and binding Agreement. In any case, it is customary that the deposit be paid to the Vendor's agent or lawyer to be held in trust until the completion of the transaction.
2. Conditions: It is customary for a sale/purchase of a chiropractic practice to be conditional upon the occurrence of one, some or all of the following conditions, namely:
a. The Purchaser verifying, to his or her satisfaction, the financial and patient records of the practice. The matter of "verification" actually constitutes the conducting of a "due diligence" search which will be dealt with in a subsequent article. The verification should be conducted so as not to interfere with the Vendor's practice or staff.
b. The Purchaser receiving and satisfying himself or herself as to the terms and conditions of the lease agreement for the clinic premises, and the written consent and approval from the Landlord of the premises for full assignment of the said lease agreement and may include the entering into of a renewal agreement extending the term of the Lease for a particular time period of, for example, at least 5 additional years from the date of the expiration of the present term. Alternatively, the Purchaser may desire to enter into a new lease for the premises.
c. The Purchaser obtaining satisfactory financing. It is important that the Purchaser receive a firm commitment from the lender prior to waiving any condition for financing. In addition, the parties may negotiate financing to be provided by the Vendor or through a leasing company and what security, if any, is going to be given by the Purchaser to the lender.
d. The Purchaser making satisfactory arrangements with the office staff and associates of the practice for their continued employment and involvement with the practice after closing.
e. The Purchaser obtaining licensor to carry on practice as a chiropractor within the applicable jurisdiction. This condition must relate to obtaining a license to carry on practice and not merely the graduation from an educational institution.
The conditions contained in the Agreement may be for the benefit of the Purchaser or the Vendor or both. Most of the above conditions may be for the sole benefit of the Purchaser and, as such, might be waived by the Purchaser. However, certain conditions might be for the benefit of both Parties, as in the case of licensure. Obviously both Parties have an interest in ensuring that the practice be transferred to a licensed practitioner.
3. The Purchaser will be interested in ensuring that the Vendor is a resident of Canada at the time of Closing. If the Vendor cannot execute a statutory declaration indicating that he or she is a resident of Canada, the Vendor will have to produce a certificate from Canada Customs and Revenue Agency authorizing the completion of the transaction or alternatively the Purchaser will have to withhold certain funds from closing and submit the funds to Canada Customs and Revenue Agency.
4. The Purchaser and Vendor will have to agree on the specifics relating to the Vendor's agreement not to carry on a practice within a specific location for a specific period of time, otherwise known as a non-competition agreement. The Vendor will generally agree not to carry on practice, as a chiropractor and/or acupuncturist, directly or indirectly, whether as a principal, partner, associate, investor or advisor, within a specific distance from the practice location for a specific period of time (ie. 2 to 5 years) from the date of completion of the agreement. In addition, the Vendor will generally be required to agree for a period of from between 2 to 5 years from the date of closing to not solicit, treat or otherwise advise patients of the practice. It would be wise for the Parties to agree on what patients might be seen by the Vendor after closing as in the case of immediate members of the Vendor's family and those other patients of the practice who might otherwise be inclined to be treated by the Vendor after closing. By setting out specific patients the Agreement will be evidence of the fact that the parties have put their mind to the issue of the reasonableness of the non-competition agreement. In addition, the Purchaser may wish to ensure that the Vendor agrees not to recommend any patient or former patient or the referring sources of Vendor's patients to any other chiropractor other than the Purchaser.
At the present time, there remains a genuine issue as to the enforceability of a non-competition provision. The Court of Appeal of Ontario has recently determined that a non-competition provision would not be enforceable if the issue could have been dealt with effectively by the use of a non-solicitation provision. At a minimum, it is important to consider having a determination of what the damages might be if there is a breach of the provision. If the Purchaser is required to prove the damages which he or she might have suffered as a result of the Vendor breaching his or her non-competition agreement, there may be difficulties if the Purchaser's billings have not actually been affected by the Vendor commencing a practice within the specified geographical area. The Purchaser may also wish to have inserted in the Agreement an acknowledgement by the Vendor that the granting of an injunction would be reasonable upon the Vendor breaching the non-competition agreement.
5. The Purchaser will want to ensure that all of the telephone numbers of the practice are included in the purchase price and that the Vendor will execute all of the documentation which might be necessary to transfer the telephone and facsimile numbers.
6. The Purchaser will want to ensure that the Vendor will be the owner of the assets to be acquired by the Purchaser free of all encumbrances, liens, and security interests. In addition the assets should be in good working order at the time of closing.
6. the terms of the Agreement
7. the execution of the Agreement
8. the completion of a due diligence investigation of a practice
9. the completion of the transaction
10. issues arising after the completion of the transaction
TERMS OF THE AGREEMENT:
We have already reviewed the parties to the Agreement; the price to be paid for the practice; and the assets to be included in the transaction. The following are some of the additional provisions that are customarily dealt with in the sale and purchase of a chiropractic practice.
1. Deposits: Obviously the Vendor will desire a large deposit and the Purchaser will want to pay a minimum deposit. It may be appropriate for multiple deposits to be paid as in the case of a certain amount paid with the execution of the Agreement with a further deposit paid after the expiration of any conditions contained in the Agreement which result in their being a firm and binding Agreement. In any case, it is customary that the deposit be paid to the Vendor's agent or lawyer to be held in trust until the completion of the transaction.
2. Conditions: It is customary for a sale/purchase of a chiropractic practice to be conditional upon the occurrence of one, some or all of the following conditions, namely:
a. The Purchaser verifying, to his or her satisfaction, the financial and patient records of the practice. The matter of "verification" actually constitutes the conducting of a "due diligence" search which will be dealt with in a subsequent article. The verification should be conducted so as not to interfere with the Vendor's practice or staff.
b. The Purchaser receiving and satisfying himself or herself as to the terms and conditions of the lease agreement for the clinic premises, and the written consent and approval from the Landlord of the premises for full assignment of the said lease agreement and may include the entering into of a renewal agreement extending the term of the Lease for a particular time period of, for example, at least 5 additional years from the date of the expiration of the present term. Alternatively, the Purchaser may desire to enter into a new lease for the premises.
c. The Purchaser obtaining satisfactory financing. It is important that the Purchaser receive a firm commitment from the lender prior to waiving any condition for financing. In addition, the parties may negotiate financing to be provided by the Vendor or through a leasing company and what security, if any, is going to be given by the Purchaser to the lender.
d. The Purchaser making satisfactory arrangements with the office staff and associates of the practice for their continued employment and involvement with the practice after closing.
e. The Purchaser obtaining licensor to carry on practice as a chiropractor within the applicable jurisdiction. This condition must relate to obtaining a license to carry on practice and not merely the graduation from an educational institution.
The conditions contained in the Agreement may be for the benefit of the Purchaser or the Vendor or both. Most of the above conditions may be for the sole benefit of the Purchaser and, as such, might be waived by the Purchaser. However, certain conditions might be for the benefit of both Parties, as in the case of licensure. Obviously both Parties have an interest in ensuring that the practice be transferred to a licensed practitioner.
3. The Purchaser will be interested in ensuring that the Vendor is a resident of Canada at the time of Closing. If the Vendor cannot execute a statutory declaration indicating that he or she is a resident of Canada, the Vendor will have to produce a certificate from Canada Customs and Revenue Agency authorizing the completion of the transaction or alternatively the Purchaser will have to withhold certain funds from closing and submit the funds to Canada Customs and Revenue Agency.
4. The Purchaser and Vendor will have to agree on the specifics relating to the Vendor's agreement not to carry on a practice within a specific location for a specific period of time, otherwise known as a non-competition agreement. The Vendor will generally agree not to carry on practice, as a chiropractor and/or acupuncturist, directly or indirectly, whether as a principal, partner, associate, investor or advisor, within a specific distance from the practice location for a specific period of time (ie. 2 to 5 years) from the date of completion of the agreement. In addition, the Vendor will generally be required to agree for a period of from between 2 to 5 years from the date of closing to not solicit, treat or otherwise advise patients of the practice. It would be wise for the Parties to agree on what patients might be seen by the Vendor after closing as in the case of immediate members of the Vendor's family and those other patients of the practice who might otherwise be inclined to be treated by the Vendor after closing. By setting out specific patients the Agreement will be evidence of the fact that the parties have put their mind to the issue of the reasonableness of the non-competition agreement. In addition, the Purchaser may wish to ensure that the Vendor agrees not to recommend any patient or former patient or the referring sources of Vendor's patients to any other chiropractor other than the Purchaser.
At the present time, there remains a genuine issue as to the enforceability of a non-competition provision. The Court of Appeal of Ontario has recently determined that a non-competition provision would not be enforceable if the issue could have been dealt with effectively by the use of a non-solicitation provision. At a minimum, it is important to consider having a determination of what the damages might be if there is a breach of the provision. If the Purchaser is required to prove the damages which he or she might have suffered as a result of the Vendor breaching his or her non-competition agreement, there may be difficulties if the Purchaser's billings have not actually been affected by the Vendor commencing a practice within the specified geographical area. The Purchaser may also wish to have inserted in the Agreement an acknowledgement by the Vendor that the granting of an injunction would be reasonable upon the Vendor breaching the non-competition agreement.
5. The Purchaser will want to ensure that all of the telephone numbers of the practice are included in the purchase price and that the Vendor will execute all of the documentation which might be necessary to transfer the telephone and facsimile numbers.
6. The Purchaser will want to ensure that the Vendor will be the owner of the assets to be acquired by the Purchaser free of all encumbrances, liens, and security interests. In addition the assets should be in good working order at the time of closing.
Purchase and Sale - Eleventh Post
EW: The assets other than goodwill can be a significant component in the overall value of a practice. With the pace of changing technology and the move to multi-disciplinary and rehabilitation clinics, both the overall cost related to these assets and the degree of obsolescence are becoming more important to its value.
Before assessing a value for a particular asset, a purchaser should first determine if they will utilize that asset in their practice. An asset they won't use has no value as far as the practice is concerned. This issue is extremely important from the vendor's perspective also. To maximize sale value, the vendor should be searching for purchasers who practice in a similar style and who utilize the same types of equipment.
What is the most appropriate measure for value of a particular asset? To determine fair market value, many approaches can be taken. For a practice that has wound down and has no value beyond the equipment, net realizable value might be used. In some cases, this may result in what one may term a "fire sale" price. For a going concern, on the other hand, replacement cost would be a more appropriate measure. In other words, what would it cost to replace the same equipment? Replacement cost can be difficult to assess. As an example, consider the practitioner who has included, in a sale, his well maintained twenty year old x-ray unit. On the one hand, one cannot find a similar machine depreciated for twenty years. On the other hand, its value may be the same as or greater than a newer unit because of its workmanship and features. Obsolescence also affects valuation for similar reasons. As an example, it may be difficult to find an appropriate replacement cost for an old computer. Remember, value in use is the key.
How does one arrive at an appropriate replacement cost? For inventories and supplies, using their purchase costs would be appropriate because of the turnover of the items within a year. For equipment, computers and furniture, there are a few approaches:
1. Book Value: This is the depreciated value from the financial statements. This approach is often used for its simplicity. On its own, it may be useful where the assets are not of significant value. However, extreme caution should be used. At a minimum, the original invoices for the assets should be available and depreciation policies and rates should be reviewed. Often, accelerated rates may be used for tax purposes. A review of the repairs and maintenance account on the financial statements for the previous years may provide a picture of both the maintenance and the degree to which those assets may be wearing down. Where there are significant modalities and rehabilitation equipment involved, this approach is insufficient because the margin of error becomes greater.
2. Replacement Cost New: An approach which is often recommended is to obtain prices from dealers for the listed equipment. The prices obtained are, in fact, the cost to replace the equipment - new. Certainly, in practical terms, it is a useful measure because it addresses the issue of the same equipment. On its own, however, it tends to overstate the value in most cases.
3. Replacement Cost Used: Although this would approximate fair market value, it is often the most difficult to determine. The lack of a large market for used equipment and furniture is partly the reason. This is not to say that one can=t find used equipment - only that in valuing an existing asset it is difficult to find one that is the exact age or condition. To deal with this issue, it is often useful to obtain an independent appraisal. This is particularly important with assets of significant or potentially significant value. For example, if real estate were part of the transaction, one would not hesitate to request an appraisal of the property.
Leasehold improvements is an asset that has many a practitioner confused. Since the landlord owns the property, don't they ultimately own the improvements? Yes.....and.....no. The landlord may own the assets but the tenant owns the right to use those improvements during the term of the lease. This right to use the improvements has value because a purchaser would have to invest in their own improvements if they were to move into new premises. One method to arrive at a value would be to take the original cost and apportion it over the term of the lease. The remaining cost on the date of sale would be the value. From the purchaser's point of view, they should ensure that amounts were expended for actual leasehold improvements and not the recreation room in the vendor's home. An examination of actual invoices would be useful. Also, the lease should be reviewed to see who was responsible for paying for the leaseholds. Sometimes landlords will offer to pay for leaseholds as an incentive to attract tenants. From the vendor's point of view, aggressive tax planning, whereby leaseholds have been written off as repairs can backfire on a sale. This is one reason why planning for a sale is critical.
Finally, two other issues can impact on the value of these assets: Taxes and a corporation. Sometimes the value attributed to certain assets can give rise to unwanted tax implications, such as recaptured depreciation for the vendor or increased sales taxes for the purchaser. From the purchaser's point of view, the more value attributed to assets other than goodwill will result in greater tax savings over time due to the accelerated rate of depreciation.
The corporation can impact the asset values because of the tax implications of using a corporation. A vendor who sells the assets out of a corporation will have to consider the additional tax cost of removing the proceeds from the corporation. We will address other aspects of the impact of a corporation in a future article.
Ultimately, the approaches used to value the assets specifically will depend on the situation, what types of assets, their significance to the overall sale price and the information available.
Before assessing a value for a particular asset, a purchaser should first determine if they will utilize that asset in their practice. An asset they won't use has no value as far as the practice is concerned. This issue is extremely important from the vendor's perspective also. To maximize sale value, the vendor should be searching for purchasers who practice in a similar style and who utilize the same types of equipment.
What is the most appropriate measure for value of a particular asset? To determine fair market value, many approaches can be taken. For a practice that has wound down and has no value beyond the equipment, net realizable value might be used. In some cases, this may result in what one may term a "fire sale" price. For a going concern, on the other hand, replacement cost would be a more appropriate measure. In other words, what would it cost to replace the same equipment? Replacement cost can be difficult to assess. As an example, consider the practitioner who has included, in a sale, his well maintained twenty year old x-ray unit. On the one hand, one cannot find a similar machine depreciated for twenty years. On the other hand, its value may be the same as or greater than a newer unit because of its workmanship and features. Obsolescence also affects valuation for similar reasons. As an example, it may be difficult to find an appropriate replacement cost for an old computer. Remember, value in use is the key.
How does one arrive at an appropriate replacement cost? For inventories and supplies, using their purchase costs would be appropriate because of the turnover of the items within a year. For equipment, computers and furniture, there are a few approaches:
1. Book Value: This is the depreciated value from the financial statements. This approach is often used for its simplicity. On its own, it may be useful where the assets are not of significant value. However, extreme caution should be used. At a minimum, the original invoices for the assets should be available and depreciation policies and rates should be reviewed. Often, accelerated rates may be used for tax purposes. A review of the repairs and maintenance account on the financial statements for the previous years may provide a picture of both the maintenance and the degree to which those assets may be wearing down. Where there are significant modalities and rehabilitation equipment involved, this approach is insufficient because the margin of error becomes greater.
2. Replacement Cost New: An approach which is often recommended is to obtain prices from dealers for the listed equipment. The prices obtained are, in fact, the cost to replace the equipment - new. Certainly, in practical terms, it is a useful measure because it addresses the issue of the same equipment. On its own, however, it tends to overstate the value in most cases.
3. Replacement Cost Used: Although this would approximate fair market value, it is often the most difficult to determine. The lack of a large market for used equipment and furniture is partly the reason. This is not to say that one can=t find used equipment - only that in valuing an existing asset it is difficult to find one that is the exact age or condition. To deal with this issue, it is often useful to obtain an independent appraisal. This is particularly important with assets of significant or potentially significant value. For example, if real estate were part of the transaction, one would not hesitate to request an appraisal of the property.
Leasehold improvements is an asset that has many a practitioner confused. Since the landlord owns the property, don't they ultimately own the improvements? Yes.....and.....no. The landlord may own the assets but the tenant owns the right to use those improvements during the term of the lease. This right to use the improvements has value because a purchaser would have to invest in their own improvements if they were to move into new premises. One method to arrive at a value would be to take the original cost and apportion it over the term of the lease. The remaining cost on the date of sale would be the value. From the purchaser's point of view, they should ensure that amounts were expended for actual leasehold improvements and not the recreation room in the vendor's home. An examination of actual invoices would be useful. Also, the lease should be reviewed to see who was responsible for paying for the leaseholds. Sometimes landlords will offer to pay for leaseholds as an incentive to attract tenants. From the vendor's point of view, aggressive tax planning, whereby leaseholds have been written off as repairs can backfire on a sale. This is one reason why planning for a sale is critical.
Finally, two other issues can impact on the value of these assets: Taxes and a corporation. Sometimes the value attributed to certain assets can give rise to unwanted tax implications, such as recaptured depreciation for the vendor or increased sales taxes for the purchaser. From the purchaser's point of view, the more value attributed to assets other than goodwill will result in greater tax savings over time due to the accelerated rate of depreciation.
The corporation can impact the asset values because of the tax implications of using a corporation. A vendor who sells the assets out of a corporation will have to consider the additional tax cost of removing the proceeds from the corporation. We will address other aspects of the impact of a corporation in a future article.
Ultimately, the approaches used to value the assets specifically will depend on the situation, what types of assets, their significance to the overall sale price and the information available.
More of the List
and the list continues ------
18 white water rafting
19 London, England
20 a weekend on a houseboat
21 standing on the Uffice Bridge
22 spending a day with Gordie Howe
23 preparing a power point presentation
24 Geneva, Switzerland and Lake Geneva Wisconsin
25 being the only passenger on a Piper Navaho
26 one bar mitzvah, two bar mitzvah, three bar mitzvah
27 henna tattoo
28 Oslo, Norway
29 cross country skiing
30 ’65 triumph spitfire
31 14 weddings in 11 months
32 helicopters landing on a ship
33 Hamburg, Germany
34 go karting
35 a magic trick that works
36 Costa Rica
37 rollerblading
38 ’68 mustang
39 Paris, France
40 gondola ride
32 years and time for a change!
Today was not unlike most other days. It is Wednesday. It is September 3rd, and in Toronto, the weather is sunny and warm. At CMCC the students are back in class and the world evolves in spite of itself.
But, for me things are not the same old same old. For the first time since September, 1976 I am not lecturing a class at CMCC. It is kind of sad. I still showed up at the College before 8:00 a.m. albeit on a motorcycle. Had some meetings, did what I had to do and then that was it. No class, no lecture, no nothing. So it was either time to go to the office or to do something different. The choice was easy.
I met up with Dr. John Cosgrove (’77) and on motorcycles we traveled to Collingwood to go for a motorcycle ride with Dr. John McLean (’51). Yes you are reading that correctly. He graduated in 1951, has a full head of hair, doesn’t wear glasses, is 85 years of age and rides one of the biggest motorcycles around – an 1800cc Honda VTX – and he rides it like he stole it!
For those of you who may be evidenced based practitioners (whatever that means) – all you have to do is look at Dr. McLean and realize that there must be something about being a chiropractor and naturopath that adds something to the quality of life.
Most of us hope to be mobile when we are 85 years old. Me – I want to be mobile on a two wheel motorcycle when I am the same age as Dr. McLean – that is 85 years young!
So back to today. I have decided that it is time that I start listing the things that should be done during a lifetime. A little like “100 things to do before you die”. But not quite. My list is for me -- the things that I have done that most people have not. I urge you to do the same. If the list is short – then you should start changing your ways.
My list goes something like this:
1. graduated from law school
2. taught for 32 years
3. writing articles for publication
4. eating donkey sausage in Cinzano
5. a sea cruise
6. a bungie jump
7. ballroom dancing
8. motorcycling – as in two iron butt rides of 1000 miles in 24 hours and 1500 miles in 36 hours
9. flying over the grand canyon
10. Lake Louise
11. driving the Blue Ridge Parkway
12. proctoring an examination
13. receiving a phone call on a plane
14. winning a bowling tournament with a score of 312 out of a possible 300
15. mojitos and cigars in Cuba
16. fishing but not wanting to catch any fish
17. New York, New York
I don’t know how unusual any of that list might be – but I sure would like to review the list of other people to know what I am missing. I already know that I am not going to climb a mountain (ask Dr. Gord Lawson – he has been there and done that); or run across a desert in Africa (ask Dr. Luc Laviguere – he has been there and done that).
So if you have a list share it and I will post it. It isn’t bragging – it is giving others an indication of what can be done. So as the day comes to a close – I look back and realize that I can add another number to my list -- I went motorcycling with an 85 year old chiropractor. Who would have thunk it !!!!!!
But, for me things are not the same old same old. For the first time since September, 1976 I am not lecturing a class at CMCC. It is kind of sad. I still showed up at the College before 8:00 a.m. albeit on a motorcycle. Had some meetings, did what I had to do and then that was it. No class, no lecture, no nothing. So it was either time to go to the office or to do something different. The choice was easy.
I met up with Dr. John Cosgrove (’77) and on motorcycles we traveled to Collingwood to go for a motorcycle ride with Dr. John McLean (’51). Yes you are reading that correctly. He graduated in 1951, has a full head of hair, doesn’t wear glasses, is 85 years of age and rides one of the biggest motorcycles around – an 1800cc Honda VTX – and he rides it like he stole it!
For those of you who may be evidenced based practitioners (whatever that means) – all you have to do is look at Dr. McLean and realize that there must be something about being a chiropractor and naturopath that adds something to the quality of life.
Most of us hope to be mobile when we are 85 years old. Me – I want to be mobile on a two wheel motorcycle when I am the same age as Dr. McLean – that is 85 years young!
So back to today. I have decided that it is time that I start listing the things that should be done during a lifetime. A little like “100 things to do before you die”. But not quite. My list is for me -- the things that I have done that most people have not. I urge you to do the same. If the list is short – then you should start changing your ways.
My list goes something like this:
1. graduated from law school
2. taught for 32 years
3. writing articles for publication
4. eating donkey sausage in Cinzano
5. a sea cruise
6. a bungie jump
7. ballroom dancing
8. motorcycling – as in two iron butt rides of 1000 miles in 24 hours and 1500 miles in 36 hours
9. flying over the grand canyon
10. Lake Louise
11. driving the Blue Ridge Parkway
12. proctoring an examination
13. receiving a phone call on a plane
14. winning a bowling tournament with a score of 312 out of a possible 300
15. mojitos and cigars in Cuba
16. fishing but not wanting to catch any fish
17. New York, New York
I don’t know how unusual any of that list might be – but I sure would like to review the list of other people to know what I am missing. I already know that I am not going to climb a mountain (ask Dr. Gord Lawson – he has been there and done that); or run across a desert in Africa (ask Dr. Luc Laviguere – he has been there and done that).
So if you have a list share it and I will post it. It isn’t bragging – it is giving others an indication of what can be done. So as the day comes to a close – I look back and realize that I can add another number to my list -- I went motorcycling with an 85 year old chiropractor. Who would have thunk it !!!!!!
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