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InFocus

What are the options for distressed veterinary practices?

It is important to be proactive and review and understand how your practice operates, in order to understand what your next steps should be if your practice is struggling

The challenges of running a veterinary practice have never been greater than they are at present, especially when you consider the impact of Brexit on businesses, and the relaxation of COVID-19 restrictions and support schemes. So, what are the steps you should consider taking if your practice is struggling and in need of change?

Be proactive and review how your practice operates

Review and amend any business or marketing plans that you currently have in place. This will help you to identify the key profit drivers at the practice and eliminate any unnecessary costs so that you can streamline your business.

You can also check your practice accounts and be familiar with them; it is important to know the key problem areas in your finances so that you can address them in the short and long term.

If you are struggling to pay creditors, such as bank debts, HMRC or even paying rent to your landlord, be honest and open with them about your difficulties. Try to agree payment holidays or delayed payment arrangements with them if possible

If you are struggling to pay creditors, such as bank debts, HMRC or even paying rent to your landlord, be honest and open with them about your difficulties. Try to agree payment holidays or delayed payment arrangements with them if possible, to give you extra time. Generally, lenders are keen to support businesses struggling as a result of the pandemic and can be flexible with payment plans to ensure debts continue to be paid over time.

It is important to keep salaried staff and the vets at your practice updated about your financial situation. Consider asking practice staff to take salary reductions where possible, but make sure that you lead by example.

You might consider selling and/or leasing back (to a third party) assets that are not essential to the running of your practice, such as out-of-use equipment, machinery or computers within surgeries. If you require new equipment at all, consider renting rather than buying to reduce your capital expenditure.

Chase up any outstanding invoices which have gone unpaid with renewed vigour. Consider how much credit you give to your customers and how you are currently chasing your debts to assess if you could be approaching this exercise differently.  

Refinancing and further investment

You can also consider refinancing options to consolidate your debts and make them easier to manage. This could include taking out a small business loan to inject some money into the practice immediately and keep everything afloat until problems are resolved, or alternatively seeking to consolidate existing loans into one loan at a lower interest rate.

You can also consider refinancing options to consolidate your debts and make them easier to manage

The practice might be eligible for grants or other forms of support, which are often available from local authorities, to help offset your debt. If you own your practice alongside a number of other investors, you could consider the issue of additional shares to raise equity finance.

As stated above, you should also think about alternative ways to deal with your current creditors and debtors. For example, you might consider invoice factoring, which involves selling your outstanding invoices to a factoring company at a discount in order to realise cash from your debtor book. You could otherwise offer discounts to outstanding debtors to encourage quicker payment.

You should also think about alternative ways to deal with your current creditors and debtors

Insolvency processes

If your practice is in financial difficulty which is becoming unmanageable, you should seek professional advice as early as possible in relation to the appropriate steps you should be taking in such circumstances and to fully explore the options available to you. The sooner you seek advice in this respect, the more likely it is that there will be a range of options available to you which could avoid the need for a formal insolvency process. 

If your practice is in financial difficulty which is becoming unmanageable, you should seek professional advice as early as possible in relation to the appropriate steps you should be taking … and to fully explore the options available to you

It is key to ensure that you have guidance through any restructuring or insolvency process so as to minimise the risk of personal liability which could arise if directors do not comply with their duties at such a time. If you are running your practice as a sole trader or partnership, or if you have provided a personal guarantee to a lender, you may also need to seek advice in relation to your personal position and the options available in that respect.

The RCVS and regulatory considerations

While not immediately obvious, a veterinary practice in distress may need to ensure that its registered members can still abide by the declaration on admission to the veterinary profession. 

While not immediately obvious, a veterinary practice in distress may need to ensure that its registered members can still abide by the declaration on admission to the veterinary profession

Many readers will have promised and declared that they will:

  • Pursue the work of their profession with integrity
  • Accept their responsibilities to the public, clients, the profession and the Royal College of Veterinary Surgeons
  • Above all ensure the health and welfare of animals committed to their care

A practice in distress or on the brink of insolvency does not mean that the RCVS Code of Conduct is breached, per se, but the declaration is broad and must be considered in the light of difficulties faced when in distress.

A practice in distress … does not mean that the RCVS Code of Conduct is breached, per se, but the declaration is broad and must be considered in the light of difficulties faced when in distress

Paragraph 5.3 of the Code of Conduct requires all registrants to notify the RCVS within three months of any convictions or “adverse findings” that could affect their registration (and note that “adverse findings” is not defined). Unlike, for example, the Solicitors Act 1974 which mandates that the practising certificate of a solicitor is immediately suspended following the bankruptcy of a solicitor, the Veterinary Surgeons Act 1966 is less prescriptive. However, “disgraceful conduct”, which could be an adverse finding, could lead to removal from the register. You should bear this in mind when operating in distress.

Hayley Phelps

Hayley Phelps is a Legal Director in the restructuring and insolvency team at Harrison Clark Rickerbys, specialising in transactional and advisory work. She acts for all types of stakeholders throughout restructuring and insolvency processes to try to find solutions that work for everyone.


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Kamal Chauhan

Kamal Chauhan is an expert regulatory defence solicitor and is part of the health and social care team. He advises clients on the regulatory aspects arising in transactional matters (acquisition and disposal of businesses) and advocates on behalf of and defends clients who are under investigation and pursued by their regulatory body.


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