Counsel was instructed to advise a client previously operating a care company, which became the subject of a wrongful death inquest following the death of a service user under her company’s care. The incident involved a failure in handover procedures and emergency protocols, which led to a fatal fire. As a result, the local authority deemed the client persona non grata, effectively terminating her ability to operate in the borough.
The client initially sought to pursue legal action against the local authority, but was advised against it due to a lack of legal merit. Instead, she identified a third party with a clean Care Quality Commission (CQC) record to whom she could refer former service users. She proposed a profit-sharing arrangement with this third party, informally agreed upon, but now seeks to formalise the relationship. Counsel advised that a gentleman’s agreement and a formal contract are mutually exclusive and that clarity is needed.
Counsel advised that the most appropriate structure would be a Consultancy Agreement between the client and the new care provider, under which the client would refer service users in exchange for an annual salary of £90,000 after an initial three-month period and a 30% share of company profits, with the care provider retaining 70%. The client also wishes to include a third party (who introduced her to the care provider) in the agreement, adjusting the profit share to 20% for the third party, 30% for the client, and 50% for the care provider. Counsel raised concerns regarding the need for disclaimers to protect shareholder rights and the risk of the care provider ceasing operations or winding up the business, which would not legally require consultation with the client or the third party. A template Consultancy Agreement was requested to reflect these terms and address the identified risks.
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