Having a partnership deed in place will ensure all aspects of a dispute are settled fairly and relatively quickly, says Dr Gerard Panting


   

When GP partnerships turn sour, issues that would be trivial in all other circumstances are magnified out of all proportion.They are identified as important matters of principle or perhaps just a chance to be bloody minded.

For doctors caught up in a terminal partnership dispute, a practice agreement, also known as a partnership deed, may save a fortune in legal fees and prevent all the angst and aggravation of litigation. So even in the friendliest and smoothest running partnerships, drafting and signing an agreement at the outset is essential.

Hempsons, solicitors well versed in all aspects of partnership law, make a number of chilling observations on their website:1

‘Although partnerships generally start with high hopes, some will end in acrimony. By the very nature of partnership, mountains can be made out of molehills. By taking experienced advice at an early stage, perceived grievances can more readily be overcome and satisfactory solutions found.’

In the absence of a partnership agreement, a ‘partnership at will’ exists between the parties. The real disadvantage of this is that any one of the partners can dissolve the partnership at any time, thereby creating a host of financial, legal and practical problems.

Partnership deeds

So what should be in a partnership deed and how do you go about acquiring one?

Partnership deeds are bespoke items. The deed must be drawn up by someone with expertise in partnership law and must address all the issues about who is in the partnership, what is expected of them in terms of workload and capital and what they can expect in return.

The deed should anticipate difficult issues around partners leaving or being expelled, or notice periods required and how the outgoing partner’s share is to be valued, and how long the other partners have to pay the retiree.

And should the former partner decide to set up shop in the vicinity, what, if any, restrictions are there?

Can he, for instance, decamp complete with his patients insofar as individual GPs have their own patients any more.

What to include in a partnership deed

Even if the practice does not own its practice premises, there will be items which belong to the practice that must be valued every time someone leaves or joins.

Whether or not the practice owns its premises, there will be issues to do with repairs and decoration so it is important to be clear about responsibility for meeting these bills.

And of course there is the nitty gritty of running a practice. Do all decisions have to be unanimous? Or are some decided on a simple majority or 75% vote?

These decisions could well have significant financial implications – the more significant the greater the argument for unanimity or something close to it. Are there some decisions that can be taken in a partner’s absence? If so, what is the quorum for a practice meeting?

Prior to the introduction of the ‘new’ GP contract, partnership deeds were more simple affairs addressing the sort of issues set out above.

Equity partners

Now, general practice partnerships may include practice nurses, practice managers and other healthcare professionals as equity (as opposed to salaried) partners, all enjoying a share of the practice profit, the right to vote at practice meetings and the great boon of Schedule D tax assessment.

On the downside,equity partners in a practice are jointly and severally liable in the event of a claim being made against an individual partner or the partnership as a whole.

In practice, this simply means that if your partner cannot meet the required amount in a claim, all the other partners then become liable – a compelling reason to ensure that all partners are fully indemnified against adverse awards of costs and damages in clinical negligence claims.

But the concept of joint and several liability extends beyond clinical negligence claims and can apply, for example, to tax demands which in one case drove a GP to bankruptcy after her partner fled the country having failed to pay the Inland Revenue their dues, leaving the doctor cursing her luck as well as her former partner.2

Being an equity partner clearly has its disadvantages, particularly for practice managers and nurses and the concept of salaried partnership may appear much more attractive.

True, there is no share of bumper profits but equally there is no share in financial famine either and no prospect of being caught in the joint and several liability snare.

Other issues that stem from the new contract include the out of hours issue – is the practice in or out? And if one of the partners decides to work extra sessions for the local out of hours provider, is that money his or hers to keep or does it go into the practice pool?

Naturally, the same question applies to all other sources of extra income. Another new contract option is to become an NHS body, which again is something that ought to appear in the partnership deed.

All GMS partnerships will also need to set out what services they intend to offer patients – essential, additional or enhanced.

These are all important issues which should appear in the partnership deed.

Pear-shaped practices

Inevitably, some practices founder. Practice agreements can also set out how disputes within the practice should be addressed.

Often this involves an outside body, maybe the BMA or LMC, and some deeds will refer to arbitration (nowhere near as simple, straightforward or cheap as it sounds).

This so-called bottom line clause, or arbitration clause, is important as it may prevent litigation within the partnership, which is invariably destructive and embittering for both sides.

Conclusion

Practice deeds are best seen as an investment. They may seem expensive but they cannot be done on the cheap.

The deed must reflect your practice and its business as it evolves so keeping it up to date is important.

With any luck you will never need to look at it, allowing it to while its days away in between updates, gathering dust in a drawer.

However, if it does comes into play, the deed must answer all the issues that arise. Any gap will let the lawyers through to get their hands on your money.

 

  1. www.hempsons.co.uk
  2. Personal communication

Guidelines in Practice, December 2005, Volume 8(12)
© 2005 MGP Ltd
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