The Importance of Partnership Agreements for GP Practices

2 May, 2018

Four hands signing around a table

There can be many benefits to both an individual GP and to a practice, of a GP being appointed as a new partner.  But once the decision has been made for a GP practice to take on one or more new partners, it’s important that the arrangement is formalised quickly by way of a written partnership agreement so that all partners are very clear as to the terms of the working relationship.  Once signed, the partnership agreement will set out matters such as each partner’s obligations and responsibilities, financial commitments, profit share and any restrictions on the partners.  Importantly it should also deal with retirement from and dissolution of the partnership. 

 

In practice however, negotiations as to the terms of a partnership agreement with incoming partners can take some time to finalise.  Whilst it may be tempting for GPs to start working together in partnership pending the finalisation of a new partnership agreement, this should be avoided where possible.  As discussed in my article here concerning the Court of Appeal case of Cheema v Jones, the risk of proceeding whilst new terms are still being drafted, is that the arrangement is likely to create a new ‘partnership at will’ between the continuing and incoming new partners which is governed by the provisions of the Partnership Act 1890 (the Act). 

 

The Act is somewhat outdated and not really suited to a modern GP practice.  It doesn’t contain any useful provisions such as probationary periods to help deal with issues which might arise whilst the suitability of new partners is under review and provides that profits are to be equally shared between all partners from the outset.  Further it does not sufficiently set out the partners’ duties and restrictions or allow any partner to be expelled even if there are grounds to do so.  Under the Act any partner can serve notice to end the partnership at any time and certain events such as the bankruptcy of a partner can also trigger dissolution of the partnership which may put the NHS Contract at risk.  The provisions of the Act are therefore likely to be very different from what partners might intend or usually agree in a written partnership agreement.  Ensuring that a written partnership agreement is concluded between all partners at the outset will avoid the implications of the Act and help minimise the risk of disputes arising in the future.