In this latest article in our series on partnership agreements we’re including some tips which will help ensure that your agreement covers key issues that need to be included when drafting the document.

Firstly a reminder – if there is no agreement in place, it’s likely that the Partnership Act 1890 will apply. The legislation doesn’t reflect how partnerships run in the modern world, and partners can find that it doesn’t provide the protection they expected.
  
1. Capital share
Partners will usually have committed capital to the partnership so it’s vital that the agreement states how much each partner is contributing. If this isn’t included, the Partnership Act provides that each partner owns an equal share.
2. Profit share
Be sure to spell out each partner’s share of the profits from the partnership. As with the capital share, the Partnership Act provides that each partner is entitled to an equal profit share unless otherwise stated. 
3. Management rules
It’s useful to set out the work input required from each partner. This helps in providing clarity over how much time and attention is expected from all partners, and can help avoid future disputes.
4. Partner entitlements
Standard employment rights including annual and parental leave don’t apply to partners as they are not employees, so it’s advisable to set out what partners are entitled to.
5. Retirement
Under the Partnership Act, the retirement of one of the partners means the end of the partnership. Partnership agreements should therefore outline how a partner can leave the partnership and how their capital share will be valued.
6. Dealing with disputes
The agreement should state how disputes between the partners will be handled, and ultimately on what grounds a partner can be expelled from the partnership, as well as what process would apply. 

The latest edition of Humberside LMC's newsletter for GPs and practice teams is available to download. 

This edition includes all the latest news, events and guidance including: 

• Updated guidance on Data Protection, including Appointing a Data Protection Officer 
• Key legal issues for GPs
• How You can ensure you have a robust partnership agreement 

Download our April 2018 newsletter (PDF). 

You can find all previous editions of the our newsletter on our Newsletters page. 

The LMC has published new guidance on the responsibilities of practices to designate a Data Protection Officer inorder to comply with the requirements of the GDPR. The new advice sheet Appointing a Data Protection Officer under the General Data Protection Regulation sets out the legal position affecting practices, explores the options as to who should be appointed as DPO, and outlines what duties the role involves.

Download Appointing a Data Protection Officer under the General Data Protection Regulation.  

Although there have been regular warnings about the importance of having an up to date partnership agreement in place, we still regularly come across situations in general practice where the absence of an agreement causes considerable problems. These can be extremely difficult to resolve, and lead to expensive legal bills and prolonged stress for all involved. 

If no agreement is in place it is likely that the Partnership Act 1890 will apply and the partnership will be deemed a ‘partnership at will’. Similarly, if an agreement has not been drawn up to cover all likely issues it is likely that this legislation will apply to those situations where the agreement is silent or unclear. 

As you’d expect, a law dating from the nineteenth century doesn’t reflect how partnerships operate in the modern era. Consequences of being a partnership at will include:

• Any partner can dissolve the partnership at any time 
• No partner has the right to expel another partner for any reason 
• Death of one of the partners will automatically dissolve the partnership 
• All partners are entitled to an equal share of the assets and have equal liability for the debts
• No partner has an automatic right to carry on the partnership.

We strongly advise all partnerships to protect themselves and avoid these and other difficulties by having a professionally drafted, up to date agreement in place. Look out for the next article in this series when we’ll be looking at tips to ensure you have a robust agreement in place.