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Avoiding partnership pitfalls

Solicitor Richard Buono explains how to avoid common mistakes when creating or updating a partnership agreement for your practice.

A partnership agreement sets out the terms of shared ownership and provides legal protection for each partner should a dispute arise. If you do not have an agreement already in place, then you have simply entered into a ‘partnership at will’, which is subject to statutory provisions and may not be representative of your specific situation and needs.

Any partner can dissolve a ‘partnership at will’ with immediate effect, if, for example, they decide to leave or go through a disciplinary procedure with the GMC. This could result in termination of the practice’s contract with the PCT. Similarly, if a partner retires or dies then the partnership would be dissolved and a new contract with the PCT would be required.

In a partnership agreement, every member will hold contracts with the PCT, meaning shared responsibility and profits – so it is strongly recommended by industry organisations such as the BMA and legal professionals that a formal agreement be drawn up and regularly updated. Here are a few important points to consider.

Establish if you have an up-to-date agreement

Do you have a partnership agreement and if so, when was it last updated? Partnership agreements drawn up pre 2004 will require revision to ensure that they are still valid and effective. If you do not have one, or if it has not been recently modernised, you should seek the advice of a specialist solicitor as soon as possible.

Introducing a new partner

When a new partner joins you have two choices. You can either draw up a new agreement, or simply update the current one by having your new partner sign a Deed of Appearance agreement with the existing PCT contract.

Check what the agreement covers

Think carefully about what needs to be put into the agreement when you set it up. Your practice premises are your most valuable asset, so if your partnership agreement includes ownership then ensure there is a provision to share the property if a partner leaves.

Agree practice management decisions

It is important to check that your partnership agreement stipulates how the practice will be managed – for example, which decisions have to be taken unanimously and which via majority. Bear in mind that if too many are taken unanimously then this can hinder the process and may not fairly represent all partners’ views.

Set out how your QOF earnings will be handled

Make sure that your QOF rights are visibly set out in the partnership agreement. Check that it is clear how the money is distributed and how the share of profit would be dealt with, should a partner leave the practice.

Update sickness and maternity provisions

It is crucial to ensure that your sickness and maternity provisions are fit for purpose in the modern climate, as old agreements pre 2004 are often not strong on maternity leave. Consider who the agreement states will pay for locum support to cover sickness and maternity leave as you need to confirm that adequate provisions have been made.

Clarify retirement provisions

Retirement provision is also an important point to clarify, to ensure that the date does not fall foul of recent amendments to employment law. You should also ensure that retirement provision does not contravene age discrimination laws.

Decide the extent of entrepreneurial ventures

Entrepreneurial GPs are forming joint ventures with other clinicians with a view to bidding to provide services to clinical commissioning groups. Thought must be given to whether being involved in such joint ventures, or other work carried out outside of the practice, should be permissible under the partnership agreement, or permissible only with the other partners’ consent.

Whether partners involved in joint ventures or other work have to account to the partnership with the income from these activities, or whether they can treat such income as private, should be addressed. If the partnership as a whole has formed a company – for example, to provide an extra service or operate a pharmacy – then care must be taken to make sure that outgoing partners can be compelled to resign directorships and sell their shares in the company on leaving the partnership.

A clear and up-to-date partnership agreement will not only safeguard your whole practice, but also each individual member within it. Confirm you have a formal agreement, check it has been recently revised and if you are in any doubt, seek advice from a specialist solicitor.

Richard Buono is a medical practice law specialist at Blacks Solicitors LLP