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GP Finance - How to ... check your partnership deed

An out-of-date or badly drafted partnership agreement is worse than useless, warns Lynne Abbess.

Every GP partner knows they should have a partnership deed but is everyone aware of what should be in it? An inadequately drafted or out-of-date deed can be worse than no deed at all.

Partners' names

The date the partnership started should be clearly stated. If there has been a partner change but the agreement does not reflect this, you will have to prove that you are entitled to rely on it by showing that it remains 'the intention of the parties': in other words, that the current partners have agreed to be bound by it.

Partnership and individual earnings

Partnership income and individuals' earnings should be identified because many disputes are about money. Income that individuals are entitled to retain, such as private fees, should be stated.

Partners' personal expenses

Entitlement to personal expenses should be listed and the same principles should apply to every partner. It may be appropriate for the partnership initially to bear some personal expenses, such as defence fund subscriptions and income tax.

Profit shares

The partnership deed must clearly record each partner's share of the profits, including steps to parity for new partners. This means that for the total number of hours committed to the practice, each partner should receive a pro rata share of the profits.

Partnership obligations

It is crucial that partnership obligations are set out in the deed because they are the backbone of the partners' relationship.

Absences

Agreements for absences should cover holidays, sabbaticals, sickness, maternity, paternity, adoption, jury service, outside appointments and service in the armed forces. Details should be discussed and agreed in advance, including who pays for a locum.

Leaving the partnership

Voluntary retirement, expulsion and compulsory retirement or a 'green socks' provision should be considered. The last is the right to require partners to retire, even though they have done nothing wrong (for example, they do not fit in for some reason).

The partnership obligations listed in the deed are important in establishing whether a partner is acting unreasonably.

Suspending a partner

Suspending a disaffected partner who has given notice to leave may be preferable to their presence during their notice period. Suspension may also be required to provide partners with a period for investigation before serving an expulsion notice.

Departure issues

Accounts preparation (particularly quality points), valuation and disposal of assets, and enforcement of any restrictive covenant if a partner leaves should be spelled out, with a timeframe.

Dispute resolution

Some partnerships prefer to omit dispute resolution and to decide the best way forward on the basis of the circumstances at the time. Alternative dispute resolution, arbitration and application to the courts are possible options to include in the agreement.

- Lynne Abbess is a partner and head of professional services at medical specialist solicitors Hempsons (www.hempsons.co.uk)

WHAT YOUR PARTNERSHIP DEED SHOULD COVER

- Current partners' names and start date.

- Partnership and individual earnings and expenses.

- Profit shares. Make sure equality prevails.

- Partnership obligations.

- Length of absence and who bears locum costs.

- Retirement and leaving the practice.

- Suspension of a partner.

- Preparation of accounts, assets valuation and restrictive covenant when partner retires.

- Dispute resolution procedures, including alternative dispute resolution or arbitration, and court proceedings.

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