PARTNERSHIP AGREEMENTS

Cynthia Cummings,

Employment Adviser

Why have a writtenPartnership Agreement?

• ensures the proper conduct of the business arrangement

• avoids future disputes

• negates the need to have a partnership at will

Partnership at Will

• Partnership Act 1890

• Partnership at Will requires dissolution when partners leave or join

• With an agreement this can be negated

• Necessary to protect financial aspects

New Partner

• The Partnership Agreement can be worded so a new partner can be included in the partnership by the use of a short addendum

• Agrees to bound by terms of existing agreement

• Parity within 3 years of joining(maximum)

What needs to be in the Partnership Agreement?

• Date of agreement

• Names and addresses of partners

• Title of firm (Business Names Act 1985)

• Address of practice premises

• The nature of the business

• Commencement and duration

The Capital

• Property

• Equipment

• Drugs stocks

• Fixture/fittings

• “Working capital”

Premises -Ownership/Rent/Payments

• Expenses of the partnership• Premises costs• Employee costs• Accountancy• Stationary• Bank charges• Practice telephones• Should be paid before profits divided

Personal Expenses

• Home

• Home telephone

• Car

Income of the Partnership

• All professional fees and earnings

• Posts outside the practice

- part-timers

- seniority payments

- postgraduate education allowance

Division of receipts

• Partnership agreement should state each partners share and allow for any future adjustments

• To be properly represented as a partner. PCT must be satisfied that:

• Has appropriate profit share of at least

Full time = 1/3rd of greatest

3/4 time = 1/4 of greatest

1/2 time = 1/5 of greatest

Attention to the affairs of the firm

• Time commitment to practice should be stated

• Usually expected to devote substantially all their time and attention

• Outside work must not conflict

• Permission should be gained from others

• Should not be unreasonably withheld

Tax

• No longer joint and several liability on the partnership profits

but• each partner will have to complete an annual

self assessment for Inland Revenue• Agreements need to provide for the keeping

of records• Partnerships may have a tax reserve account

Staff

• The agreement should not allow summary dismissal

• All partners would be liable for an unfair or constructive dismissal

• All should have opportunity to voice opinion

• Tribunal limit for wrongful dismissal no £50,000+

Decision Making

• Most matters settled by majority

or

• eg 6 partners - decisions of 4:2

3 partners - unanimity

• All entitled to be heard

• Any partner not a party to the making of the decision is not bound by it

Unanimous decisions

• Change of partnership business

• Admittance of a new partner

• Dismissal of staff members

Holidays and Study Leave

• Should be separated allocations

• Should be same for all partners

• Restrictions on how many may be off at one time

• Employment of locums

Sickness Absence

• Personal Health Insurance/income protection/locum expenses

• PCT contribute towards locum• Most practices cover the first month• Larger practices sometimes cover longer• Expulsion for lengthy incapacity• LEAVING PARTNERSHIP

Leaving the Partnership Voluntarily

• Notice period

• Usually at least 3 months

• Detail mechanism for sorting out finances

eg premises, drawing, capital

Leaving the practiceinvoluntarily

• Lengthy incapacity

• Bankruptcy

• Removal/suspension from register or medical list

• Gross breach of partnership agreement

• drug or alcohol addiction

• No Green Socks Clauses!

Retirement

• Terms of Service require GPs to retire at 70

• Retirement possible before 70 - for agreement

• Need to consider possibility of “carrying” an elderly partner not capable of doing fair share of work

Restrictive Covenant

• To be enforceable, it must be reasonable

• Patients of practice at time of leaving

• One year

• Two mile - of practice area

Defence Body Membership

• It is essential and the agreement should oblige partners to subscribe

Arbitration

• BMA will mediate only in a dispute

• Provision for an arbitrator needed

• However avoid use of arbitrator if possible

- EXPENSIVE!

Banking and Accounts

• Bankers and Accountants should be named

• Provisions for drawing cheques

• Free access to accounts for all partners

AND FINALLY

When joining a partnership

• Get a “feel” for the practice and partners

• Ask to see accounts and other books

• Look for fairness and equity

• Have the partnership agreement checked by local BMA Office

• Remember - there are more GP vacancies than GPs to fill them at the moment

GET IT RIGHT!

Salaried GPs

PCT Contracts

• Employed directly by PCT NHS conditions should continue

Contract of Employment

• Employee of Practice• Governed by practice terms and conditions• Will previous NHS Service be recognised?

• Within the contract:-• Parties• Location• Pay• Salary - range and starting salary

Leave Annual - how much?

• When?

• Application?

Study - how much? When? application? Who pays?

Sick leave • notification and certification

• entitlement to paid sick leave

Maternity leave • requirements on advising practice

• entitlement to pay

• Notice Period• Work outside the practice• Defence Body

• membership

• subscription

• Mileage allowance• Telephone allowance