If a GP practice does not have in place a partnership agreement the provisions of the Partnership Act 1890 will apply. These provisions are archaic and can have disastrous consequences. Now is a good time to establish whether there is an up to date partnership agreement not only to avoid the pitfalls of the provisions implied by the Partnership Act but also in light of the beginning of CQC registration during summer 2012.
Any individual, partnership or organisation that carries on a regulated activity must register with the CQC as a service provider. For general practice the CQC expects that the provider will usually be a partnership or there will be an individual GP responsible for running the practice. The CQC guidance states that if the regulated activity is provided by a partnership it is the partnership that must register.
The guidance states that "you should normally only register as a partnership if you have made arrangements for all partners to accept joint and several liabilities for the way the regulated activity is carried on, and each individual partner has agreed to this. This will normally be documented through a written agreement, but this is not a requirement to registration".
The guidance stops short of making it a mandatory requirement for GP partnership practices to have an express partnership agreement in place. We would strongly recommend, however, that all partnerships consider putting one in place; not only because of the provisions that will otherwise be implied by the Partnership Act but also because the partners will be jointly and severally liable to achieve compliance with the CQC outcomes, whether or not there is an express partnership agreement in place. Therefore any express partnership agreement should specifically provide that each partner commits to complying with the terms of the CQC outcomes and to provide the remaining partners with a remedy should a partner fail to comply.
What is the position if the practice does not have a partnership agreement?
Death: If any partner dies, the Partnership Act provides that the entire partnership is dissolved which means that its assets must be realised, liabilities paid and the partnership must be wound up. Instead, there should be express provisions that on the death of any partner, the partnership still continues for the benefit of the remaining partners and with provisions for the surviving partners to buy out the deceased's partnership share.
Dissolution: section 26 of the Partnership Act provides that any partner can dissolve the entire partnership by notice to the other partners with immediate effect. Again this would trigger any partner being able to cause the partnership to realise all of its assets, pay off its liabilities and dissolve the practice. Instead, there should be provisions for an orderly retirement, with a partner only being permitted to retire on giving so many months' notice to allow enough time for discussions with funders to buy out the retiring partner and with enough time to notify the PCT and CQC of imminent partnership changes.
Expulsion: under section 25 of the Partnership Act in the absence of a specific term in the partnership agreement, the partners cannot expel a partner. Instead there should be detailed provisions to allow partners to expel a fellow partner in certain circumstances. For example, being removed from the performers' list, being subject to a fitness to practise hearing or failing to comply with the CQC Outcomes pursuant to the Health & Social Care (Regulated Activities) Regulations 2010.
Profits: in the absence of a specific provision to the contrary, section 24 of the Partnership Act provides that profits are to be divided equally. This can be an issue where GP practices have part time Partners or where, for pension purposes, GPs may be looking to work for fewer sessions.
If you would like any assistance in creating a new partnership agreement or updating an existing partnership agreement please speak to Duncan Shepherd [email protected]
