Partnership agreement – or disagreement

Many professional healthcare practices, such as GP, dental and veterinary practices, are structured as general partnerships. Sometimes, an express, written partnership agreement governs these partnerships, but this isn’t always the case.

The lack of a written partnership agreement can give rise to numerous problems. The usual position is that, without a written agreement, a partnership will be a ‘partnership at will’, which means that the rules that govern it derive from archaic partnership legislation from over a century ago. This legislation may deal with certain basic partnership principles, but it is not always comprehensive and has significant limitations.

One example of this is that a partnership at will can be dissolved by a partner giving notice to the other partner(s). Also, the death or bankruptcy of a partner can result in the partnership at will being dissolved automatically. The legislation also does not deal with important matters such as differing entitlements of partners to partnership profits, losses and capital, the potential ring-fencing of partner liabilities, partner duties and authority, ownership of assets, partner leave/retirement and restrictions on outgoing partners.

A written partnership agreement can deal with all of the above and can be viewed as a vital step towards minimising the risk of potential partner disputes by helping to create a formalised working relationship between partners.

It is also worth noting that a partnership at will can arise if a new partner joins a practice and doesn’t sign a written agreement.  Even if there is a written agreement in place, this should be updated whenever a new partner is taken on and reviewed regularly to reflect any ongoing changes to the business and legislative requirements.

Preparing a partnership agreement can be a complicated and time-consuming task, so the best advice is to plan carefully and get legal representation at an early stage.

At Debenhams Ottaway Solicitors, we have significant experience in advising healthcare professionals on a plethora of partnership-related matters, including producing and amending partnership agreements, assisting with setting up new partnerships and advising upon new joiner and retirement arrangements and partnership dispute matters.

If you wish to discuss your requirements with us, please do not hesitate to contact senior lawyer James Brawn, in our company and commercial team.