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Taking on new partners: a practical guide for GPs

The new financial year is a prime time for new partners to join practices.

With this being the case we are producing a new three-part guide centered around the taking on of new partners.

The first part focuses on the importance of due diligence when appointing new partners. The second will explore the importance of having a partnership agreement, whilst the third will consider the need to make sure that your partnership agreement is up to date.

Part 1 - Securing a suitable new partner

Part 2 - Importance of partnership agreements

Part 3 - Up-to-date partnership agreements

 

Part 1 - Due diligence: the first steps towards securing a suitable new partner

The first part of our three-part guide looks at the importance of incoming partners having the opportunity to review core business and financial documentation and, you obtaining full and complete references for the new partner.

 

Provision of core business documents

The three core documents to give to a new partner, which may vary depending on your particular practice, are:

  1. Your partnership agreement
  2. The partnership accounts
  3. Practice property documents

Read on to learn more about the importance of having these formal documents in place and available to share with any new GP partners.

 

Partnership agreement

As a document which identifies the obligations, responsibilities and restrictions of the partners in your practice, your partnership agreement is, without question, the most important document that should be provided to any incoming partner, especially as they will be required to sign up to it.

Providing your partnership agreement to any proposed new partner will help provide clarity on:

  • Their sessional commitment and share of net profits;
  • Their financial commitment in terms of contributing capital or otherwise;
  • The provisions handling leave (sick leave, maternity leave or otherwise), in particular what happens in terms of a partners profit share during times of absence and what their obligations will be in respect of locum costs;
  • The provisions concerning the practice premises and whether the incoming partner will be expected to 'buying in';
  • The provisions concerning the valuation of partnership assets, in particular those concerning premises;
  • The provisions concerning expulsion and retirement.

If no agreement is in place then, as an alternative, you should seriously consider the possibility of discussing the terms upon which you will work together with a view to drawing up a formal agreement to document your working relationship.

Find out more about some of the dangers of failing to have a formal agreement

 

Partnership accounts

This seems obvious but any incoming partner should be given the opportunity to review the last three years accounts of the partnership.

This task will ensure that the incoming partner is aware of the financial status of the partnership and, crucially, what the likely returns will be.

 

Practice property documents

Whether your practice premises are leased or owned it is crucial that the incoming partner is made aware of the arrangements.

If the premises are leased then there are five core things that any incoming partner is likely to be interested in, namely the:

  • Term (length) of the lease;
  • Rent and other sums payable under the lease and the extent to which they are reimbursable;
  • Rent review provisions;
  • Provisions concerning repair and maintenance and historic dilapidations;
  • Existence of break clauses (if any).

If the premises are owned, then any new partner will want to know:

  • If they are required to "buy in" and if so:-
    • The share to which they will be asked to acquire;
    • From whom they will acquire this share (current or ex partners);
    • How such share will be valued; and
    • The date upon which they will be expected to have completed the "buy in"
  • If they are not required to "buy in":-
    • What are the terms governing the practices' occupation of the premises?
    • If there are no terms, what security would the partnership have to remain when all property owners leave?
    • Who is responsible for repairs and maintenance?
    • Who are the current owners?

 

Obtaining references

Unless a proposed new partner has worked with you before, you can never be entirely sure that they will professional and personally fit in with your practice.

The risk that they won't can be mitigated by ensuring that you obtain a full employment and training history for the proposed partner along with supporting personal and professional references.

In doing so, some key things you may wish to consider before offering partnership to an individual are:

  • Make it clear that any conditional offer of appointment is subject to satisfactory checks being obtained and verified
  • Clarify that any offer of appointment may be withdrawn if, at any time, it becomes apparent that the proposed partner has withheld information, or has provided misleading or false information
  • Request a full employment or training history
  • Obtain an explanation of any gaps between periods of employment or training
  • Asking for the details of individuals and/or other practices who can provide both personal and professional references.

 

Coming soon

Don't forget to look out for the next instalment of this series. Part two - the importance of having a partnership agreement.