This may seem an obvious tip; however, I am amazed at the number of times I am approached by people who have tried to take shortcuts and simply landed an even bigger invoice than the one they were trying to avoid. Indeed, it is only a matter of time before a new federation lands itself with a legal suit or loses a tender because they took shortcuts.
This is not a pitch for people to contract BW Medical Accountants for support but rather an attempt to highlight the folly of some of the things drawn to my attention over the last four weeks alone:
1. "We want to cobble together a shareholders agreement and articles of association and will come back to you when we really need a proper one!"
a) When I tried to explain they need a "proper one" now I was dismissed completely as "not understanding their needs".
b) The group putting this particular federation together is developing a complete recipe for disaster, and it is all driven by the desire to avoid costs that really cannot be avoided.
c) Any federation being formed needs the correct governance from day one, particularly if for example they are to engage with a CCG around a tender/any qualified provider, or a Foundation Trust for a sub-contracted piece of work or a partnership to bid for work.
d) Anyone (for example a commissioner) asking to see the shareholders agreement and or articles of association will see through anything that has been "cobbled together" and the costs then become significant in two ways:
i. To put the documents right
ii. The missed opportunity and the need to then rebuild a demolished reputation
2. "We have been trying to find, download and copy a loan agreement from the Internet for member practices to sign up".
a) There are a number of technical legal issues that need to be considered when preparing a loan agreement. If the agreement is not properly drafted, there is likely to be a lack of clarity about, for example, how interest will be calculated and the circumstances in which the loan can or must be repaid.
b) A loan agreement between practices and a federation needs to strke the right balance between protecting the investment of the lending practice and enabling the federation flexibility to make repayments according to its financial position. A commercial loan agreement downloaded from the internet is unlikely to cater to the particular requirements of a practice/federation lending arrangement.
3. A federation who approached a practice in the federation next door to ask for a copy of the business case they had around the development of a service. Fortunately the person approached didn't have a copy and approached the board who immediately declined, realising the potential for breach of their copyright and at the same time the risk of competition from a federation right next door.
a) There would have been no problem had a formal request to the board been made, where costs of the development could have been shared and a formal partnership approach taken; however, that's unlikely to happen now as it has been made clear the approach was made to cut corners and avoid cost.
b) Federations are legal entities and have to be developed correctly from the start. Shortcuts are simply risking the set up and long term viability of the federation, and make no sense at all, as ultimately when it goes wrong it will simply cost more to put right. It is therefore MUCH better to get it right first time!
If it is to succeed, the federation needs to be able to rely on practices complying with the terms and conditions of contracts that the federation wins and take action to address problems if they arise in a fair and transparent manner. The articles of association and shareholders' agreement provide the framework for managing the involvement of practices in the federation and dealing with internal problems and disputes, which may arise in a cost effective manner. The costs of obtaining specialist legal assistance with the federation's constitutional documents are relatively insignificant when spread across a number of practices. Legal fees to resolve disputes, which arise because of the absence of clear documentation, (or as a result of poorly drafted documentation), tend to significantly exceed the fees that would have been incurred preparing the documents in the first place.
For more information on how BW Medical Accountants can support you in forming a federation, or to arrange to speak to one of our experts please contact firstname.lastname@example.org or call 0191 653 1022.
Additionally, if you should have questions for us please email email@example.com and we will do our best to answer these within the blog.