In recent weeks, we have seen an increase in the number of enquiries from GP practices regarding the inclusion of a last person standing clause in Partnership Deeds.

The “last person standing” issue refers to one partner being left as a potential sole practitioner and having to deal with any dissolution of partnership obligations and liabilities. This could be as a result of successive partner retirements and no ability to replace those exiting. There are a few ways that can prevent the “last person standing” from being burdened with the financial and emotional consequences of a dissolution of partnership.

Check your Partnership Deed

Check your Partnership Deed and, in particular, the voluntary retirement provisions. There should be provisions in the deed which require an exiting partner to give notice to leave (we would suggest no less than six months and no more than 12 months) together with clauses that do not allow another partner to retire within 12 months, for example, of the retirement or death of another partner. This will prevent the quick succession of retirement of partners.

Two or more Partners giving notice at the same time

Ensure that your Partnership Deed includes a clause which provides for two or more partners giving notice at the same time.

This clause is necessary to prevent a group of Partners from thwarting the intention behind the deed by each serving notice simultaneously and setting up a new partnership together. Not only that, it also prevents the increased impact of those remaining having to buy out more than one Partner at the same time.

Include an actual last person standing clause in your deed

This can be drafted in one of two ways. The first is to state that if there are, for example, three or less partners left in the partnership, and one gives voluntary notice to retire (in accordance with the deed), the other partners can decide whether to accept the retirement notice or dissolve the partnership. That way, all of the partners will share the dissolution obligations and liabilities rather than one or two partners being left with them.

The second way is to state that if there are, say, three or less partners remaining in the partnership, and one gives voluntary notice to retire (in accordance with the deed), the other partners can decide whether to accept the retirement notice or suspend it for a period of time (12 months) whilst they seek to recruit a new partner. If they cannot recruit a new partner in this timeframe, they can decide whether to accept the retirement notice or dissolve the partnership.

Include a sinking or lease repair fund

If the partners occupy leasehold premises, it is also important that the Partnership Deed include a sinking fund / lease repair fund for any repairing / maintenance obligations under a lease and any other potential practice obligations. This will ensure that any “last person standing” is not left with large lease liabilities upon any potential dissolution.

The risk of “last person standing” are more crucial now than ever and if this could potentially cause an issue in your practice, it is a good idea to seek professional advice and review your Partnership Deed to ensure that all partners are properly protected.

How Capsticks can help

Capsticks’ Primary Care Group knows the workings of healthcare practices inside and out, including the commercial challenges they face. Our legal experts understand the need for robust contractual arrangements, and can arrange a new partnership deed for you or revise and update your existing one.

If you have any queries around what's discussed in this insight, and the impact on your primary care organisation, please speak to Puja Solanki, or any of your contacts at Capsticks, to find out more about how we can help. For more Primary Care related resources, why not check out our sector page, here.