What to include in a GP partnership agreement

What does a GP partnership agreement need to cover – and what are the dangers of not having one?

A partnership agreement recognises the requirements, responsibilities and restrictions of partners at a practice and all incoming partners are required to sign this agreement – but what should it include?

Probationary periods – it is common practice for a new partner to have a probationary period. This means that, if required, the appointment of the new partner can be terminated on short notice. 

Working commitment and profit share – a partnership agreement should detail the commitments that are expected of the new partner and confirm what profit share they will receive – for example, will they get full parity immediately, or over time?

Capital contributions – practice partners are required to give capital contributions and the way they are to do this should be stated in the partnership agreement. The contribution can either be paid over a period of time or taken from undrawn profits. 

Historic liabilities – when a practice is looking for a new partner, having the existing partners take responsibility for historic liabilities is a great way to attract prospective partners. This could include past dilapidations in lease premises or rent overpayment. 

Premises – before a GP partnership agreement is written is it a good idea to revisit the practice premises arrangements. The agreement will depend on whether the premises the practice operates from are leased, or owned by the partners or as a partnership asset. 

If they are leased, the agreement should state whether the new partner will be expected to become a named party in the lease and, if so, how this will be achieved. If the premises are owned, the agreement should state whether the new partner is expected to buy-in. Further considerations for partners buying into premises include:

• Who they will acquire the interest from?
• When they will be expected to complete the ‘buy-in’?
• How the value will be ascertained; will independent surveyors be used?
• Whether there is a defined means of valuation in the existing partnership agreement.

What happens if there is no agreement?

If there is no GP partnership agreement in place, existing partners may still be protected by the Partnership Act 1890; however, the act does not cover all aspects of a GP partnership and not having an agreement puts the practice at risk.  Potential risks include:

• Any partner can serve notice to end the partnership at any time.
• No probation period.
• No equality in share of profits, losses and capital.
• No limits on the authority of a partner to enter arrangements which bind the partnership.
• No protection for assets held by the partners individually.
• No assistance in identifying how assets are valued and paid. (For example, if a partner leaves and no protection if you suffer automatic dissolution of the partnership).
• No partner can be expelled from the partnership by other partners.
• No cover for leave and locum costs.