The dangers of having an out of date partnership deed

The pace of change in primary care has accelerated over the last few years and with so much going on it can be easy to forget to check you have the basics covered.

The Partnership is at the heart of most GP practices, and having a partnership deed that is up to date, valid and fit for purpose is vital if the interests of all partners are to be protected. Yet often a partnership deed may be forgotten, or only thought of, at times of major change or when a dispute arises.

Whilst most GP partnerships will be aware that having no deed at all is extremely risky, failing to keep it updated can also have serious implications.

Further reading: 4 legal issues to consider if one of your GP Partners “Burns Out.”

There are many reasons a deed may go out of date, or even be invalidated. So while you may feel you have everything already covered, if you haven’t looked over your deed recently then it’s probably time you did.

Some of the key issues you need to be aware of are:

1) A new partner has joined

While the retirement/removal of a partner won’t invalidate your current deed, the addition of a new partner does. Once your deed is invalid you are regarded as operating as a ‘partnership at will’. This is about the worst situation you can find yourselves in because it means your service contract and the entire practice is immediately at risk.

2) New income streams

An out of date deed will lack clarity, or won’t even deal with, the distribution of new income streams affecting a modern practice. How partners share any profits and losses is a frequent cause of disagreement, potentially resulting in a very expensive partnership dispute further down the line.

3) The sharing of risk

If your deed lacks clarity about the sharing of any ‘risks’ then it’s time for an upgrade. For example, what will happen if the CQC takes action against the Registered Manager? Does your CQC Manager pick up the liability, or will it be shared in some way by the partnership?

4) Asset valuation

We have seen an increase in the number of disputes arising out of the valuation of non-property assets owned by the practice. Examples include pharmacy shares, GP Federation shares, and even legacies. When a partner leaves, should they be bought out of their share of these assets, and to what extent is their value separable from the partnership? Your partnership deed needs to be clear about what happens in this event.

5) Lack of detail over property ownership

An out of date deed may not deal adequately with issues of surgery occupancy, the rights of the property owning partners, or how NHS Premises Funding and property related costs will be shared. This can be just as much a problem for leasehold as it is for freehold surgeries. Clarity is needed to ensure both owning and non-owning partners are appropriately protected and rewarded.

Futher reading: Beware the ‘Last Man Standing’ issue in GP Practices

To help you assess if your partnership deed is in need of an upgrade, we’ve prepared a checklist for you of some of the key issues that an up to date deed should cover. Take a look and if your deed doesn’t cover these points then it’s time to act and seek appropriate legal advice.