As GPs and GP practices continue to face both change and challenge, it remains important that the legal documentation protecting your medical business and property are in place, current and up to date. This includes the partnership deed – one of the most key documents governing how the business operates, but also one that is less frequently reviewed than other aspects of practice management.

While a deed may continue to be legally effective for many years, changes in the practice itself, including new partners, evolving Primary Care Network (PCN) arrangements and different ways of working, can mean that it no longer reflects the intentions of the partners as clearly as it once did. A regular review of the partnership deed can help ensure that it remains in line with the realities of the practice and provides clarity when important decisions need to be made.

This insight covers when a deed should be updated and sets out some top tips on how this can be achieved efficiently.

When do partnerships need to update their deed?

• If you have a valid and effective partnership deed in place, the retirement, death or the expulsion of a partner will not invalidate the deed. Rather, the terms of the deed will simply continue to bind the continuing partners. However, this would be an opportune time to review your deed and ensure that it correctly reflects the way the partners want to operate their business and that it is, in fact, current and valid.
• The legal trigger for updating your partnership deed is when a new partner is intending to join the partnership. If a new partner joins the partnership without being bound into the deed, the addition of that new partner will invalidate the deed. This remains the case even if the new partner is joining the partnership on a probationary period, as they will be considered a partner to the outside world.

Efficient approaches to keeping partnership deeds up to date

In the absence of any partnership changes, it is always a good idea to “health check” your partnership deed on an annual basis to ensure that it correctly reflects the operation of the business.

If there have not been any partnership changes, and there are none intended for the foreseeable future, then instead identify one or two key trigger points during the year to remind partners simply to read and review their deed. The two following issues are a good starting point:

• Primary Care Networks: The partnership deed should include specific provisions relating to how funds from the relevant PCN are dealt with in the partnership accounts. The deed will not only need to specify the general treatment of any surplus or deficit funds from the PCN within the partnership accounts but also how these funds/liabilities filter down into each individual partner’s current account balance. This is particularly important for an outgoing partner’s calculation of their share of the partnership capital.
• Non-clinical partners: If a non-clinical partner (practice manager) is admitted into a medical partnership, a final pay control charge could apply to them where pensionable pay fluctuates – depending on the practice’s profits. The rules state that if the non-clinical partner receives an increase to their pensionable pay which exceeds the “allowable amount” in any of the three years prior to their retirement date from the partnership, the NHS Pensions Agency can impose a fine on the partnership. The partnership is liable to pay the charge and therefore the partnership deed must then either state that the partners agree to payment of the charge or that the charge is the non-clinical partner’s responsibility.

Conclusion: good practice

A partnership deed should not be viewed as a document that only becomes relevant when a partner joins or leaves the practice. Reviewing annually – as businesses often review their accounts – can help to ensure that it continues to reflect the way the practice operates and the intentions of the partners, particularly as arrangements evolve over time. In addition, changes in premises arrangements are likely to be important triggers in reviewing how ownership and liabilities for mortgages are handled in the partnership deed or declaration of trust, where dealt with in separate documentation. Practices should also seek legal advice on which, if any, provisions may need to be updated when they are carrying out these annual reviews.

How Capsticks can help

Capsticks’ Primary Care Group work with hundreds of healthcare practices and have extensive knowledge of their commercial challenges. Our expert and specialist lawyers understand the need for robust contractual arrangements and can arrange new partnership deeds or revise and update existing deeds.

If you have any queries around what's discussed in this insight and the impact on your primary care organisation, or if you need legal advice on reviewing your partnership deed, please speak to Partner Mark Jarvis or Head of Real Estate Sam Hopkins.

Find out more about our Primary Care services here.