Irish Veterinary Practices and Incorporation

Introduction

Over the past five years there has been a dramatic change in how Irish veterinary practices are owned and operated. Traditionally, Irish veterinary practices have been run as sole traders or partnerships rather than companies. This was due to s54(2) of the Veterinary Practice Act 2005, which appears to prohibit the use of corporate structures. The relevant section states:

“A body corporate shall not… represent itself as prepared to do or perform any act, matter or thing the doing or performance of which constitutes part of the practice of veterinary medicine.”

However, a clarification on the matter from the Veterinary Council of Ireland (“The Veterinary Council”) radically changed this status quo.

Change

The Veterinary Council is the statutory body responsible for the regulation and management of vets. It publishes a code of professional conduct, and in this code, s54(2) was interpreted as preventing corporate bodies from owning veterinary practices. As a result, this interpretation of s54(2) was widely accepted, and the traditional ownership structures for operating veterinary practices were maintained.

However, in 2017 it became apparent to the Veterinary Council that there were inconsistencies in the code of conduct in relation to the matter of ownership, and so they sought legal advice to amend the code.

The Veterinary Council were advised that as s54(2) did not mention the ownership of veterinary practices, the Council had no legal authority to regulate this area. In response to this, in December 2017 the Council changed their code of conduct to explicitly state that corporate ownership of veterinary practices was not prohibited. While not in fact a change in the law, this amendment was treated as such. Corporations, often from Britain, quickly moved to buy Irish practices. One company, Independent VetCare, had bought around 20 different Irish veterinary practices by 2022. Further, there are an increasing number of new domestic and international veterinary acquirers active in the Irish market.

Why Incorporate?

There are a number of clear benefits to becoming a corporation for veterinary practices:

• Corporations can make unlimited contributions to employer pensions, and these contributions can be made before deduction of tax
• Corporations pay tax at a rate of only 12.5%
• Corporations can offer share options to valuable employees
• Corporations allow for limited liability for its owners. The company is viewed as a separate legal entity and such its accountability is separate to that of its owners
• Veterinary practices can make use of corporate structures to attract outside investment, allowing them to grow their business
• Incorporating makes it easier to sell the business. To date, corporations buying Irish veterinary practices have paid considerably above the business’s market value

Push Back

Despite these benefits, there has been considerable pushback against the wave of incorporations that followed the Veterinary Council’s change in guidance. This has been led by the agricultural community, who are concerned that practitioners may be directed by corporate owners to prioritise profitability, meaning the agricultural market may be neglected in favour of the more lucrative domestic pet market.

This backlash has resulted in political action, with the introduction of the Veterinary Practice (Amendment) Bill 2021 in November 2021 which prohibits the ownership of veterinary practices by persons, other than a veterinary practitioner.

However, it has been stated by members of the Veterinary Council that despite this change, the professional standards required by the regulatory body continue to be applied and enforced. The high quality of veterinary care found in Ireland due to these standards is therefore here to stay, regardless of ownership structure. Interestingly, in Britain the corporatisation of the industry has apparently resulted in an improved service for rural farmers. The increase in practice size that corporatisation facilitated allowed for far more flexibility in dealing with the problems agricultural veterinary brings. Afterhours rosters and efficient-large scale planning have helped mitigate difficulties associated with the industry such as remote locations and anti-social hours.

Conclusion

Incorporation is a hugely beneficial step for veterinary practices, allowing for more flexibility, greater tax efficiency and limited liability. Similarly, the buying and selling of veterinary businesses requires significant preparation on each side which can be very beneficial to all when appropriate preparations are made.

How we can help

BHSM has represented a number of Irish veterinary practices throughout buy-side and sell-side processes, and as a result has considerable experience in this field. This experience means we can advise on exactly what steps to take when preparing for such a transaction, removing the unnecessary stress that is otherwise so common when selling a business.

If you have any queries or concerns, or would like to discuss the above in further detail, please feel free to contact Joe McVeigh, Partner in our Corporate Department, on jmcveigh@bhsm.ie / +353 1 440 8300.