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Is it time to incorporate your Local Medical Committee?

Local Medical Committees (LMCs) play a central role in representing and supporting GPs in their area, so it is important that they exist in a robust legal form. They have been around for over 100 years, and some of their representation functions are defined in statute. LMCs have traditionally been established as ‘unincorporated entities’, and these unincorporated entities are, in turn, recognised by the commissioners to be the representative body and to receive the statutory levy.

Many LMCs have set up companies to manage their ‘secretariat’ activities, but this is very different from incorporating the LMC itself, as the LMC can only be the body recognised by the commissioner – which is almost always the unincorporated entity, not the company.

Challenges of Unincorporated Local Medical Committees

The reason Local Medical Committees use companies for their secretariat activities is that companies benefit from limited liability and can contract in their own name. By contrast, unincorporated entities have unlimited liability and can only contract in the name of their officers. This makes it simpler to enter into employment contracts, contract with suppliers, enter into leases, manage bank accounts, etc. and gives much more protection to the company’s officers against litigation.

The problem is that when you have both an incorporated entity and an unincorporated entity with the same name and ostensibly carrying out similar functions, you must be very careful to ensure that everyone understands which functions are being carried out by which entity. Otherwise, you risk creditors and claimants arguing that they can pursue both, thus defeating the limited liability advantages of setting up the company.

Possible Solutions for Incorporating Your LMC

In an ideal world, you would do away with the unincorporated LMC entity entirely and move all LMC activity into a company. The company would then form the committee, which the commissioner would recognise as the representative body and recipient of the levy. What we believe to be a ‘first’ has recently been achieved by a Local Medical Committee with support from DR Solicitors.

The LMC set up a company limited by guarantee to represent all the GPs in their area as members and then obtained the necessary approval from the commissioner to recognise the company as the LMC. The unincorporated entity was then superfluous and was wound up, making all future LMC activity both lower risk and simpler to operate than in a two-entity solution.

Summary

This new LMC operating model has the potential to be transformational. If you are looking to improve LMC governance, it is certainly worth considering moving all LMC activity into a single limited company entity. However, it is not a ‘one size fits all’ solution, and careful consideration needs to be given to the pros and cons before doing so.

For a free initial consultation on the pros and cons of incorporation, whether you are an LMC, a PCN, or a GP practice, please call us or email enquiries@drsolicitors.com.  


Note

We do not recommend trying to incorporate on your own. There are legal and tax implications for which professional advice from specialist solicitors and accountants is required. You must also comply with the NHS Act and follow a process which, to the best of our knowledge, has only been successfully done once before – with the assistance of DR Solicitors!

Readers should note that LMC incorporation is very different from PCN or GP practice incorporation. All these can be done, but the process and the pros and cons are all very different.

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