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Dr John Couch explains why partnerships must have a partnership deed, and what needs to go in it
a partnership deed, and what
needs to go in it
Partnership deeds or agreements are contracts made between GP partners. Most partnerships are smooth-running and rarely need to consult them, but acrimonious disputes can be destructive. Deeds should minimise disharmony if something does go wrong and ensure the business's survival. It is unwise to join a practice that does not have an existing up-to-date deed.
Once you have been provisionally offered a partnership you should ask for a copy. Read through it yourself as well as asking a specialist solicitor to check it. The BMA provides guidelines and has its own specialised solicitors. To cover all eventualities in a fair and legally binding fashion, deeds must be comprehensive and can easily run to 40-50 pages.
Is it valid?
To be valid the agreement should reflect the current partnership; signed, witnessed and dated from when this commenced. Deeds drawn up originally for a past partnership with additions for subsequent partnership changes can be perfectly legal, but there is a danger that they may no longer reflect current conditions.
If a deed is no longer valid you should still check it carefully. Your solicitor can then exchange letters of intent via the partnership solicitor that a new agreement will be drawn up within a specified period (six months is reasonable). If you are broadly happy with the old agreement, solicitors can always provide for this to apply until the new agreement is set up. Partnership cost of a new deed is £1,000-£1,500.
The deed should state partners' names and addresses, the date the partnership began, practice address(s) and practice area. Partnership bankers, accountants and accounting date should be named. Relevant NHS Acts are also stated. A variety of other words and phrases used will also be defined.
Day-to-day running of the practice
The following clauses should be included:
·Practice policy/business plan, both short- and long-term
·Current and continuing membership of an approved medical defence body
·Rotas for both in-hours and, where applicable, out-of-hours work
·How non-clinical tasks are allocated/shared
·Holiday and study leave entitlement
·Sabbaticals (not all practices allow these)
·Sick leave; maternity/paternity leave
·Compassionate and adoption leave.
Pay special attention to sick and maternity leave. Remember employment law does not apply to partnerships. The BMA lays down guidelines but these are not set in stone and clauses can vary widely.
Standard sickness clauses allow up to three months' absence, with the partnership paying any locum cover costs. After this time the sick partner will often pay personally for locum costs and drawings may also be affected. This will have a bearing on the timing and cost of any sickness and locum insurance cover you choose to take out. An average deed may state that after six months' continuous sickness (or 200 days non-continuous in 24 months) you can be asked to leave the partnership.
The maternity clause must be separate from the sickness clause and clearly state that entitlement is in addition to sickness. Generally, the maternity clause cannot be less advantageous than the sickness clause. Pay particular attention to the point at which partners on maternity leave start to pay for their own locum cover and receive any locum reimbursement personally.
These are common areas for disagreement and must therefore be covered very thoroughly. The following are minimum requirements:
·How practice income is earned
·How practice money is spent
·Items that are individual expenses
·How outside appointment income (and workload issues) are dealt with
·Other earnings outside the partnership
·How profits are shared and what can be kept individually as 'prior shares'
·Parity and part-time issues
·Banking and accountancy
·Record-keeping; tax liability
·Financial commitment (working capital and property); locum cover
·Property ownership (including valuations) or rental liability; capital assets.
You should already have established your parity share in writing and should ensure this is incorporated when the deed is updated or redrawn.
Study the clauses on tax liability, contribution to working capital and capital assets and property as these will directly affect you.
'Prior shares' usually refer to items such as seniority, golden hellos/handcuffs and rent reimbursement. Outside appointments and outside earnings often cause disagreement so examine these clauses carefully.
Leaving the partnership
There must be clear clauses referring to retirement or leaving for other reasons. How much notice is required? Who gets precedence if two or more partners want to leave in a short space of time? Entitlement to further profits, withdrawing capital, including property shares, should also be covered.
There may be a clause preventing partners setting up as rivals within a certain distance for a certain time. This may not be legally binding if too restrictive and a 'within one mile and one year' rule is usual.
The likelihood of some of these events is low, but should be covered.
·Long-term sickness and death
·Notice to leave or retire
·Call-up for armed forces.
For disputes there should be a policy of at least majority decision-making and how to resolve serious disputes involving a tied vote (usually via the BMA), including the right to invoke this. Check for balanced conditions and procedures for expulsion. It is essential that a partner committing serious breaches can be removed if necessary. However, the procedures should also protect partners unfairly accused.
Finally, few current deeds will have taken PMS and nGMS into account. From this point of view at least, most deeds now need to be updated or rewritten. Ask your solicitor specifically about this.
John Couch is a GP in