Following on from our previous insight about how to keep partnership deeds updated, this insight addresses a specific query that the Primary Care team often receives from practices about their deeds: whether and how to include a “last person standing” clause.

The “last person standing” issue is becoming increasingly common and refers to one partner being left as a potential sole practitioner following a series of retirements or departures. The situation can leave an individual partner responsible for managing the dissolution of the partnership and dealing with any associated obligations and liabilities. Steps should be taken and professional advice sought to avoid encountering this issue in your practice.

This insight outlines some of these practical steps that practices can take within their partnership deed to prevent the “last person standing” from being burdened with the financial and emotional consequences of a dissolution of partnership.

Check your partnership deed for relevant clauses

The most obvious step for practitioners is to check their partnership deeds for voluntary retirement provisions. If drafted correctly, these provisions in the deed should require an exiting partner to give notice to leave (preferably no less than six months’ and no more than 12 months’ notice), together with clauses that do not allow another partner to retire within 12 months (for example) of the retirement or death of another partner. These provisions in a partnership deed will prevent the quick succession of retirement of partners.

Two or more partners giving notice at the same time

The second way to protect your practice from the “last person standing” issue is to ensure that its 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 undermining the intention of the deed by serving notice simultaneously and setting up a new partnership. It also reduces the impact on the remaining partners of having to buy out more than one partner at the same time.

Include a “last person standing” clause in your deed

The “last person standing” clause can be drafted in one of two ways. The first approach is to state that if, for example, three or fewer partners remain 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. This means that all partners will share the obligations and liabilities associated with the dissolution, rather than one or two partners being left to deal with them.

The second approach is to state that if, for example, three or fewer partners remain in the partnership and one gives voluntary notice to retire (in accordance with the deed), the remaining partners can decide whether to accept the retirement notice or suspend it for a specified period (for example, 12 months) while they seek to recruit a new partner. If a replacement partner cannot be recruited within that period, the remaining partners can then decide whether to accept the retirement notice or dissolve the partnership.

Include a sinking or lease repair fund

If the partners occupy leasehold premises, then it is also important that the partnership deed includes a sinking or lease repair fund for any repairing or 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.

How Capsticks can help

Capsticks’ Primary Care Group works with hundreds of healthcare practices and has 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 about the issues discussed in this insight and the impact on your primary care organisation, or if you need to review your partnership deed to ensure that all partners are properly protected, please speak to Partner Mark Jarvis or Head of Real Estate Sam Hopkins.

Find out more about our Primary Care services here.