Having an up to date partnership deed in place is an effective way of governing how the partners operate in partnership together. GP partnerships can exist without a partnership deed (these are known as ‘partnerships at will’), however these arrangements are highly unstable as they are governed by default statutory provisions.  We have set out a few key points below to help you understand when you need to update your partnership deed.

Why is having an up-to-date partnership deed necessary?

It is essential to have a valid deed in place for two reasons.

The first is to protect the stability of the practice and to regularise the partnership by providing written evidence of agreement between the partners.  The deed will be written evidence of the terms upon which the partners wish to operate their business. 

It will provide certainty and clarity to the partners.

The second reason is to avoid operating as a partnership at will which will then be regulated by the default statutory provisions under the Partnership Act 1890 (‘the Act’).  This is an inherently unstable business arrangement (especially for GPs), as these default provisions provide little security for a GP partnership operating in the complex NHS world.  For example:

Partnerships at will can be dissolved at any time by any partner serving immediate notice, without the need to provide any justification in support of such notice.

This can not only create insecurity for the business as well an individual partner, it can also have serious adverse consequences by putting your NHS Contract at risk.  This is because upon dissolution, the business has to be wound up so that all of the partnership assets are sold, the staff are made redundant and the NHS Contract will automatically terminate. In a situation of conflict within the partnership, partners could find themselves ‘held to ransom’ by a disaffected partner.

The GMS Contract regulations also require new partners to be bound to the GMS Contract by virtue of a partnership deed or otherwise, so failure to do so would be a breach of the GMS Contract.

What makes a robust partnership deed?

A well-drafted partnership deed should address the key issues necessary to ensure the partnership operates smoothly.

It must include:

• the nature of the partnership’s business and its name,
• the sharing of profits and losses,
• the investments to be made as the capital of the partnership,
• decision making and the management of the partnership,
• leave provisions,
• resolution of partnership disputes,
• restrictive covenants,
• what happens if a partner retires or dies and
• CQC obligations.

While the above are the most important ones, there are other areas that a deed should cover.

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 it.  Rather, the terms of the deed will simply continue to bind the continuing partners.  In these cases, you should still review your deed and ensure that it correctly reflects the way the partners want to operate.

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 make the deed invalid.  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.

How often should the deed be reviewed?

In the absence of any partnership changes, it is always a good idea to ‘health check’ your partnership deed every two to three years. The GP world is ever-changing and nuances that are specific to GP partnerships such as income streams, regulatory compliance and property ownership do require partners to ensure that their deed is kept up to date and correctly reflects the operation of their 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. This could be the accounts date of the partnership, or the NHS financial year end (if different to the accounts date).  

What this means for you

A deed is crucial for all GP practices, not least to stabilise the partners’ working relationship by having a written document to evidence how their business should operate but also to avoid being a partnership at will. 

A well drafted partnership deed will not only contain the necessary information to ensure your partnership operates smoothly but also, and perhaps more importantly, it can avoid an unplanned dissolution or the threat of your GP partnership being held to ransom by a disaffected partner.

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.

We are now offering a discounted fee for instructions received before 14 April 2022 for the preparation of your new deed. We offer a bespoke service and will tailor the deed to ensure it meets your actual business requirements. Find out more here.

If you have any queries around what's discussed in this insight, and the impact on your primary care organisation, please speak to Mark Jarvis, or any of your contacts at Capsticks, to find out more about how we can help.