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Updating your partnership agreement

Lynne Abbess advises on when and why GP partners should review and update their partnership deed.

Retrieve your partnership deed for review at least once a year (Photograph: Istock)
Retrieve your partnership deed for review at least once a year (Photograph: Istock)

You might be under the illusion you have 'ticked the box' titled 'partnership deed' because you recall you have one stuck at the back of a drawer.

However, are you sure this is an agreement you can rely on? Has it become invalid? If so, it is as much use as a frayed knot.

When a review is needed

The most obvious situation is when the identity of the partners is different from the names appearing on the face of the deed. A partnership deed is a contract made between the parties who sign up to it.

While a well-drafted deed should allow for a partner leaving (whether voluntarily or compulsorily) the majority of GP partnership deeds do not permit the automatic addition of new partners.

New partner

A new partner legally becomes a member of the partnership on the day they join in that capacity, whether or not this is subject to a probationary period.

It is a common mistake to believe that the 'real partnership' does not begin until the end of the probationary period, but the admission of the new partner creates a new legal entity immediately.

Failure to update your deed before a probationary period starts will technically result in the instant dissolution of the old partnership from the first day of the new admission.

As it is not possible to have a two-tier partnership (with one group of partners agreeing to abide by one set of rules while others lie outside the rule book), everyone is in the same boat together and all are at risk when problems crop up.

The risk of dissolution

Without a valid partnership deed you are a 'partnership at will' – the most unstable business relationship that exists and one which can be dissolved by any partner at any time without the requirement to satisfy 'grounds'. 

If this were to occur, it follows that NHS England and/or the CCG can take the view that your NHS contract has similarly demised.

Changes to the NHS

Partnership deeds should also be reviewed and potentially updated to reflect changes in the NHS. For practices in England, GPs should have reviewed their deed in light of the practice becoming a member of their CCG and in light of the impact of CQC registration.

For example, if there is a partnership change you have to notify the CQC of the removal or addition of a partner prior to the new partnership commencing – which can take many weeks to achieve, thereby potentially delaying the start of your partnership.

It would therefore be sensible to include in your partnership agreement a reference (as an aide memoire) to the requirement to update the practice’s CQC registration each time there is a partner change.

Out-of-date terms

The less obvious reason for needing to update your deed is that its terms are simply out of date. Even if all the parties remain the same, if the arrangements in it are such that they do not make proper sense because the arrangements you currently use are different - this is a recipe for disaster.

Problems between partners not covered by the deed are usually disastrously expensive to resolve.

Good practice

So do not be lulled into a false sense of security. Ensure the partners undertake a review of the deed on an annual basis, in the same way you review your accounts each year.

Most importantly, do not put off taking specialist legal advice in order to update your deed.

The cost will always be less than resolving the problems you might otherwise face - and you might discover some hidden benefits as a result.

  • Lynne Abbess iheads the Professional Services Group at healthcare  specialist solicitors Hempsons, www.hempsons.co.uk

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