GP partnership agreements

If your practice is a partnership (and most still are), the partnership agreement or deed decides how profits are split, how decisions get made, and what happens when a partner joins, retires or has to be asked to leave. I draft new agreements, bring old ones up to date, and help practices that have discovered they don’t have one at all.

I’ve written a longer piece on how GP partnerships work if you’d like the background first.

What happens if there’s no agreement

Without a written agreement the Partnership Act 1890 fills the gaps, and its default rules were not written with a GP surgery in mind. Under section 24 every partner shares equally in capital and profits, whatever sessions they work. Under section 25 a partner can’t be expelled by the majority unless the partners have expressly agreed a power to do it. And under section 26 any partner can end the partnership by giving notice to the others.

The last of those is the biggest risk for a practice, because the GMS contract is held by the partnership, so one unhappy partner serving notice can put the contract, the staff and the premises arrangements in doubt at the same time.

This is more common than you’d think, as practices that have run for decades sometimes find that the deed was never signed, or was signed by five partners of whom two remain. Each change of partners without a new deed or a deed of adherence makes it less clear which terms, if any, still bind everyone.

What the agreement covers

I don’t work from a fixed list of clauses, as every agreement is tailored to the practice, but the same subjects come up each time.

The first is money, which means profit shares and how they change with sessions, seniority or parity for new partners, what capital each partner puts in and when it comes back out, drawings, tax reserves, and who keeps income from outside work.

The agreement also deals with how the partners work together. That covers how decisions are made and which ones need everyone’s agreement, each partner’s time commitment, holiday, sickness, parental leave and sabbaticals (and who pays for locum cover), indemnity cover, and what happens if a partner’s registration or place on the performers list is in question.

It then needs to cover how partners leave, including notice periods for retirement, compulsory retirement and expulsion (including the so-called green socks clause, which lets the others remove a partner without proving fault), how an outgoing partner is paid and over what period, and what restrictions apply afterwards. For most practices the most important clause is the one which says that the partnership continues, with the contract, when a partner leaves.

Finally there are the premises, as surgeries are often owned by some of the partners and not others, or by retired partners. The deed needs to say who owns what, how the building is valued, and whether an incoming partner is expected to buy in.

The rules on goodwill

With a medical partnership there is also the rule that the goodwill of an NHS medical practice can’t be sold (section 259 of the National Health Service Act 2006), and Schedule 21 to the Act treats some partnership payments as a sale of goodwill, for example a payment by an incoming partner for being taken into the partnership, or a payment to a retiring partner that goes beyond their share of past earnings, the partnership assets and the final settling of accounts.

So an incoming partner can buy a share of the building, the equipment and the working capital at a proper value, but can’t pay a premium for the patient list, and the buy-in and retirement clauses have to be drafted with that in mind.

Bringing a new partner in

For a new partner the questions are how much capital they contribute and whether it’s paid up front or built up from profits, how quickly they reach parity, whether there’s a probationary period, and whether they’re buying a share of the premises. A partner joining an existing deed signs a deed of adherence. If the deed is old, a new partner arriving is a good time to replace it, and the practice also has to tell the commissioner about the change under the terms of its contract.

If you’re the one being offered partnership, I can review the deed and the accounts with you before you sign, which is worth doing as you become liable for the partnership’s debts along with everyone else.

Updating an old deed

Deeds go out of date quite quickly, and I see plenty of agreements that still refer to PCTs and CCGs, say nothing about PCN income or obligations, and have no provision for parental leave. I’ll read the existing deed, tell you what needs changing and produce a revised one.

Sometimes the update brings out a disagreement that was already there, usually about profit shares or property. I can help the partners work through that, on the footing that I act for the practice as a whole. If it turns into a real dispute between partners, each side needs their own advice.

A practice thinking about incorporating will need a shareholders’ agreement covering much of the same ground.

How long it takes and what it costs

The drafting itself doesn’t take long, and most of the time goes on the partners agreeing the terms between themselves, which is often a month or two for a straightforward practice and longer where there’s property or a contested profit share.

The fee is fixed and agreed in writing before I start. Most GP partnership agreements cost between £3,000 and £6,000 plus VAT. A two-partner surgery with simple arrangements is at the lower end; a large multi-site practice with property and complicated profit sharing is at the top.

Next steps

If you get in touch and send me the current deed if there is one, a list of the partners and their sessions, and a note of who owns the premises, I’ll come back to you with a fixed fee and a scope of work.