Whilst GPs acting through a partnership is not strictly a regulatory requirement, the truth is that the vast majority, circa 95%, operate as partnerships, and other forms of running a GP are simply not available to GP practices that hold General Medical Services or Personal Medical Service contracts.
A clear and current GP partnership agreement is essential for the smooth running of any practice operating as a partnership. Without one, the Partnership Act 1890 applies. This brings real risk, as it assumes equal profit shares, allows any partner to dissolve the partnership by notice and does not address modern NHS arrangements or the realities of running a practice. The partnership agreement should be a living, breathing document that captures the details of modern practice.
This article explains why a partnership agreement is a necessity in modern practice and sets out the key points that every GP partnership agreement should cover.
A formal agreement provides stability, protects the business and avoids the uncertainty that arises under default partnership law. It clarifies the rights and responsibilities of each partner and reduces the risk of disagreements about contribution, money or decision-making.
The agreement should set out the clinical and administrative duties of each partner, along with expectations around practice management, compliance and professional standards.
The agreement should be clear how profits are calculated and shared. This includes the treatment of NHS income, private income and additional payments, along with how practice expenses and losses are allocated between the Partners.
Governance arrangements should be clear. The agreement should state which decisions require all partners to agree, which can be made by a voting majority and which can be delegated to individual partners or where appropriate, the practice manager. This helps avoid delay and ensures accountability.
The value of the land where the GP practice is located will often be the most significant asset of the GP’s business. The agreement should distinguish between the money required to run the practice, from capital tied up in the premises. It should also record who owns the premises, how interests are valued, how incoming partners buy in, how outgoing partners are bought out and how mortgage liabilities are managed.
Well-drafted dispute procedures set out a clear process for resolving disagreements whilst providing an opportunity for the partners to explore a resolution that is acceptable to all during difficult periods and helps avoid decisions that could harm the business. The agreement should include a clear process for resolving disagreements. Usually there will be a requirement to engage in early discussion, followed by mediation and then a final binding outcome if needed.
As partners are not employees, the usual employment rights relating to annual leave, sick leave, parental leave, study leave and other forms of absence do not apply to partners. The agreement should set out how drawings change during absence and who pays for locum cover.
The agreement should set out the grounds and process for expelling a partner, including voting requirements and financial consequences. Some practices include a 'green socks' clause which allows a partner to be required to leave even without misconduct. Where included, this must be drafted with care and partners must recognise that there is a risk that they could be identified as wearing green socks in the future.
Suspension provisions should also be clear, including when suspension is permitted, the rights of the partner during suspension and whether drawings continue.
The agreement should set out how partners give notice and deal with the transfer of ownership of assets held by the exiting partner on behalf of the partnership, including land for example. It may be appropriate to include a right for the partnership to delay the departures of certain partners in order to protect the practice.
Departing partners will expect repayment of their capital. The agreement should specify how capital accounts are valued, how premises interests are valued and paid out. These provisions should ensure that the partnership is able to manage its cash position while fulfilling these obligations.
Please contact our commercial team if you need advice.
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