Primary care - why a partnership agreement is important

The need for a deed

A partnership agreement is a legally binding document between partners in a business that sets out the terms and conditions governing that business.  In a modern medical practice such agreements are essential as they set out partners rights, responsibilities and obligations to one another and thus help prevent serious disputes and protect the business -including the practice NHS contract.

If you are a considering entering into partnership, or if you are in a partnership already, and do not have a written agreement, then think about the following!  

What is a ‘partnership at will’?

Partnerships can often form naturally as they begin when two or more people begin to work in business with one another with a view of profit.

Without a formal partnership agreement, a ‘partnership at will’ can be effectively created and this will be subject to the default rules set out in the Partnership Act 1890.  Even without a formal written agreement, it is likely the definition of partnership at will is satisfied where medical practitioners work together pursuant to an NHS primary care contract.

Why do I need a partnership agreement?

Unfortunately, given the time since the Partnership Act came into law, it does not cover all the matters a modern medical business needs to take into consideration. For example, partnerships at will do not have retirement, expulsion or suspension provisions, nor do they consider the different obligations of partners.  The Act makes no provision for differing levels of authority or guidance for absences, locum cover and who will bear the costs in these situations.

These concerns can only be dealt with in explicit written agreements that practitioners form with each other as partners.

What is included in a partnership agreement?

A partnership agreement provides a governance structure for the business and whilst it cannot stop partners having disputes, it should express their rights and obligations, sets out the parties shares and confirms how drawings will be dealt with. Whilst it is not always possible to provide for every eventuality it promotes consistency for the partnership and will help to protect practitioners and their NHS Contract.

A partnership agreement should always be tailored to the needs of the individual practitioners and the partnership, and must address all the issues that matter to them. It should reflect how the partnership is run and what the partners want to happen in specific circumstances.

However, irrespective of individual circumstances, here are some of the vital issues that every partnership agreement should cover:

• Commencement and duration
• Partnership assets and how they are valued
• Shares of profit and losses
• Absence from the practice (maternity, sickness, parental leave etc)
• Retirement, compulsory retirement, partial retirement, effect of retirement and restrictions on retired partners
• And importantly dispute resolution

Do I need to update my current partnership agreement?

Whilst having no partnership agreement can lead to legal issues and disputes, having an outdated agreement is also a risk.

Given the pace of modern general practice, partnership agreements tend to be put to one side until they are needed.  Inevitably, when referral to the partnership agreement is needed, it is too late for an update to be made. This can lead to legal and financial repercussions for the partners and the entire business. This can be costly, time consuming and unsettling for all concerned. 

It is best practice to regularly review partnership agreements and particularly, take care that the details of the partners are correct and up to date!

Whether a new partner is appointed or the partnership have made changes to the way in which they wish to run the business, these changes need to be reflected in your partnership agreement.

Regular review and updating of partnership agreements is an investment and protection for you and your business into the future.

How Weightmans can help you?

Our expert team of Primary Care Lawyers acts for GP’s, nurses, dental professionals, pharmaceutical professionals and other primary care providers. We take pride in being able to bring our specialist knowledge and understanding this area.

Talk to us about your partnership arrangements and any concerns you may have and we will be able to help you protect your business.