Updating your partnership deed – when, why and how16/12/20
This year has seen unprecedented challenges in the NHS, with GP practices required to change their working practices and be more resilient and adaptable. This means it is still as important as ever (if not more) to ensure that “your house is in order” and that the legal documentation protecting your medical business and property are in place, current and up to date.
In this insight, we explain when you need to update your partnership documents and set out 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.
Our tips for keeping up to date with efficiency
Notwithstanding the above, 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 your deed correctly reflects the operation of your business.
If there have not been any partnership changes, and there are none intended for the foreseeable future, it is a good idea to identify one or two key trigger points during the year to remind partners to simply have a read through their deed. In particular, the following issues are a good starting point:
- Primary Care Networks - Your partnership deed should include specific provisions relating to how monies from your PCN are dealt with in the partnership accounts. In particular, the deed will not only need to specify the general treatment of any surplus or deficit monies from the PCN within the partnership accounts but also how these monies / liabilities then flow down to 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 - We have seen a number of non-clinical partners (practice managers) admitted into medical partnerships this year. A final pay control charge could apply to a non-clinical partner where pensionable pay fluctuates depending on the practice’s profits. The rules state that if the non-clinical partner receives an increase to his/her pensionable pay which exceeds the “allowable amount” in any of the three years prior to his/her 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.
- New to Partnership Payment Scheme - NHS England launched the New to Partnership Payment Scheme in July and it is applicable to partners who will be accepting or have already accepted a partnership role on or after 1 April 2020. The Scheme has specific eligibility criteria, including the repayment of the monies if the new partner leaves the partnership in a certain period of time. We have already seen a number of clients take advantage of the scheme and who have required amendments to their deed as a result. Read our summary of the Scheme here.
The key point is not to simply put a partnership deed in place and then place in a drawer! Ensure that it is reviewed annually (much in the same way that you do your accounts) and take legal advice as to which, if any, provisions may need to be updated irrelevant of whether or not there have been any partnership changes.
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. In addition, our team is able to prepare you for new collaboration models, resolve disputes and handle employment and property law aspects.
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.