Why form a PCN company?

Many Primary Care Networks (PCN) are considering, or have already, formed an associated company to sit alongside the PCN, to assist with service delivery and carry out the functions of the PCN. This arrangement is known as “incorporating a PCN”. Here we outline several key factors to consider when deciding whether to incorporate a PCN.

Why do you want to form a PCN company?

The most immediate reason most give is to employ Additional Roles Reimbursement Scheme (ARRS) as staff numbers, costs and risks rise. Also, ring fencing this liability within a company will help manage risk and avoid personal liability. It is worth considering from the outset whether you want the company to be able to do things other than be a sub-contractor for the PCN Directed Enhanced Services (DES), for example providing support services to the practices, or some of them, or even taking on practices.

How do I go about forming a PCN company?

A company is owned by its shareholders, and its directors run the company. They may be the same people, but under the company’s constitution (known as the Articles of Association) the directors have a responsibility to manage the company on behalf of the shareholders. The shareholders agree the Articles of Association, which details the governance structure for the company, and form the company and appoint the directors. The company is then registered at Companies House.

Who are the shareholders?

The shareholders of the PCN company are the practices of the PCN. As most practices are partnerships, the partners of the practices will become shareholders. It is cumbersome to have several shareholders from each practice, so normally one partner from each practice holds the share(s) on behalf of each practice partnership.

The shareholders will agree how many shares each practice gets, and the rights which are attached to each share. Shares have to be paid for and carry votes.

Sometimes it is agreed that each practice has one share, so they are equal in the eyes of the company. Others decide that the number of shares should equate to the number of patients on the practice’s patient list.

Capital and rights of shareholders

In deciding the structure of the shareholding, it is important to take into consideration whether the company requires capital (ie money to fund the company) and the rights of shareholders. To set up and run a company costs money, and that money needs to be introduced either by share capital or by loans. If it is by loans, the company needs to be able to repay the loans and any interest. If it is share capital, then the sum paid for the shares need to be sufficient to cover the costs of the company until it is breaking even from its own income.

Shareholders have voting rights, but under the Companies Act these rights are very limited, with the directors taking most of the decisions. The rights of the shareholders may be strengthened by drafting provisions in the Articles of Association, and this has the effect of limiting the powers of the directors, as they will need shareholder approval to do some things.

How does the PCN fit in?

The PCN has its own board and decision-making procedure, so having a company alongside the PCN may appear to increase administrative complexity. However, we can align the Articles of Association and the PCN agreement so that the PCN follows the company in its actions, and the company becomes the primary decision-making body, to streamline the process.

What else do we
need to think about?

1) Sub-contracting DES services:

Practices will need a sub-contract for the company to provide the services to the PCN. The NHS have produced a standard contract for this purpose, although you will have to add your own PCN specific information to it. If a company wants to do more for the practices than DES services, then the contract needs to reflect this.

2) VAT

In providing services, the company will want to ensure it does not have to charge the practices VAT. This can be achieved by creating a cost sharing group.

3) Employment contracts

The company will issue employment contracts to the ARRS staff and have its own employment handbook. The ones that practices use may not be sufficient for the role of the ARRS and should be checked carefully. Making the employment contracts consistent and appropriate is one of the key benefits to having a PCN company.

4) Premises

The PCN may require premises, and the rights and cost of occupation need to be considered. It may be able to occupy premises covered by rent and rates reimbursement, but this should be checked.

5) Directors’ Services Agreements

Directors’ Service Agreements should be agreed, setting out what the duties and the remuneration of the directors are. You should already have an agreement with the Clinical Director (CD) of the PCN, and similar ones should be given to the other
directors, perhaps sharing the responsibilities of the CD.

6) Data sharing agreement

There should be a data sharing agreement between the practices and the company, as the company will be employing the ARRS who will need to access and add to patient records during the course of their work.

7) Partnership agreement

Each practice should review its partnership agreement to ensure that it includes, and allows for, the responsibilities of the partners in respect of the PCN and the PCN company, as well as other issues, such as the respective shareholding in the company.

We provide a legal helpline offering an initial confidential telephone conversation to discuss any of these issues.

Dial 020 7839 0278 and ask for the GP advice line for ten minutes’ free preliminary advice from one of our GP legal team.

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Ross Clark


Justin Cumberlege