No-one really wants to think about it but being prepared should a business partner die or want to leave when diagnosed with a critical or terminal illness, is vital. By James Gallaway
Partnerships in dental clinics endure all manner of difficulties. But nothing complicates working and business arrangements more than news of a colleague developing a terminal illness.
In this particular situation, the dentist didn’t want to share the details of their diagnosis with their partners. They took substantial time away from work for treatment. Eventually they announced an urgent desire to divest their share of the business. It was a recipe for crisis.
It’s a situation that occurs, according to Jonathan Harris, a director at Harris Freidman Lawyers, because the individual circumstances are trying and people struggle to cope. Nevertheless, this particular case that he was involved with, recently, is worthy of examination because “not only was my client* much younger than the age you’d expect for cancer to develop but his decision not to tell his partners that his illness was terminal probably developed from an understandably human determination to survive and a refusal to admit that death may be imminent”.
One quarter of Australian dental practitioners are now over the age of 55. As that number grows, so will the probability that dentists of all genders will develop one of the top five cancers—prostate, breast, colorectal, melanoma or lung cancer.
To some extent that depressing realisation can be offset by news that treatments since the 1980s—when survival rates were less than half for all people diagnosed—have improved to a situation where almost seven out of 10 people diagnosed, nowadays, will survive for at least five years. Depending on the cancer, survival can be as high as 90 per cent.
In a business partnership, however, when one partner is away from a practice dealing with treatments they hope will save their life, the stress and anxiety of a situation such as this will trouble both sides of any working relationship, through lost time and insecurity about future revenue.
While that partner’s colleagues may have genuine concerns for their ill partner, the urgency to replace that partner’s share of the business revenue is not as acute for them as it may be for the departing partner, who may be thinking of providing for family in the event of their death. This is particularly problematic for colleagues of the ill partner if they have not been made fully aware of the severity of the problem.
If communication between the partners is not open, perceptions can arise that the continuing partners are stalling the sales process because they stand to inherit a patient list should their partner die.
Preparing for the worst
As a specialist commercial lawyer for over four decades, Jonathan Harris has provided more than his fair share of ‘afternoon’ legal appointments for dental practitioners buying or selling practices, as well as settling partnership and shareholder disputes. As he worked previously with the client who is the subject of this story setting up a practice, he was called in to help plan succession issues that developed alongside the diagnosis.
Communicating openly with business partners is an ideal most of us strive for, so assisting a client in these circumstances was difficult for Harris, but he understands his client’s reasons for not disclosing the diagnosis as (potentially) terminal.
“This was a very difficult time for his wife and family, making the process of selling his share of the business eventually urgent. It’s a time when unintended mistrust can develop, particularly because people want to believe they will survive a battle with cancer,” he says.
Though the lines of communication were greatly strained, and a considerable amount of anxiety arose during the process, the terminally ill partner did, eventually, sell his share of the practice for a substantial amount, which, combined with a healthy life insurance payout, helped his family come out on top. He also told his partners about the diagnosis in the weeks before he died.
“There are”, Harris says, “a number of ways to prepare for this possibility, including life insurance for yourself as well as additional ‘key person’ insurance within the business where remaining partners can receive a payout to fund the buy-out of a partner who develops a debilitating illness.”
It’s well-known that insurance is the only product both the retailer and buyer hope will never be used. In situations such as this, partners setting up commercial agreements designed to secure revenues require key person insurance for each of the principals.
“Partners usually already have arrangements that take into account different working routines and specialisations, but they also share standing costs, involving fixtures and staff, equally,” he says.
Insurance costs can be divided similarly, and, in the event of a diagnosis as serious and life-threatening as cancer—even when partners are not certain that death is inevitable and are hoping for the best—everyone involved in the practice has the security of knowing that mechanisms are in place should the worst happen.
“If these mechanisms are not in place, and there is a rush to sell a share of the partnership, the anxiety involved in uncertain outcomes can develop into unspoken accusations, which, along with the very real anxieties associated with the imminence of death, creates difficulty,” Harris says.