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The main thrust of our Dispute Resolution legal update has been a focus on how mediation can be used to resolve partnership and/or practice disputes. There is an alternative….prevention.
This short article will highlight some of the key ways in which you can seek to minimise the risk of a dispute arising and/or escalating.
1. Choose your partners wisely.
Put simply, you can’t argue with yourself. A partnership dispute only arises where there are differences of opinion or interpretation as between differing individuals in your practice. As a consequence be careful when taking on partners. Ask yourself: is this person right for me and my practice on both a personal and professional level?
This is sometimes a difficult one to answer with any absolute degree of certainty. A leap of faith may, to extent, be needed. Simple measure can, however, be adopted to minimise the leap that you are having to take. These include: i) obtaining robust and complete references of your chosen candidate and ii) ensuring that the prospective new partner to be subject to a probationary period during which their involvement can be terminated on short notice (usually one month).
2. Document your working relationship.
Albeit it will not automatically create a harmonious working relationship, an up to date and robust Partnership Agreement is essential. It not only ensures that each partner’s rights and obligations are discussed at the outset, agreed and clearly documented but it can provide for a process for addressing disputes quickly and in a cost effective manner.
Our Article “Partnership Agreements: Avoid the default position” provides a good summary of the issues that you could face by not having a written agreement in place. However, disputes don’t just arise due to a lack of a written agreement. A poorly drafted or outdated document can prove equally problematic. Indeed, from our experience in seeking to resolve partnership issues it is clear that some of the core areas of dispute can be mitigated by documenting:-
i) The duties and obligations on each partner (including their sessional and, where relevant, out of hours commitment);
ii) The circumstances where a partner can be suspended and expelled from the partnership (including, without limitation, where they are suspended from the performers list);
iii) The process for taking on new partners and whether their admission is subject to the approval of all partners, the injection of capital, the buying into of practice premises etc.;
iv) The restrictions on each partner’s authority to act or decide things independently of others;
v) The process for handling an outgoing partner’s share in the partnership. How will this be calculated, will interim leaving accounts be prepared, when determined how will the relevant sums be paid?
vi) The sickness and incapacity arrangements applicable to all partners including the aggregate or consecutive amount of leave that may be taken in any given period before a partner can, where circumstances permit, be expelled;
vii) The way in which your practice premises is handled and occupied.
3. Ensure that all Partners’ are signed up.
Documenting the working relationship is one thing but the process of arranging for the resulting agreement to be signed off by all partners (and crucially any future partners) is of equal importance. Only by having all partners’ sign up to the agreement will you prevent disputes as to the applicability of provisions that underpin your partnership and the operation of your practice.
4. Premises issues
Albeit a topic in itself, carefully consider the arrangements concerning your practice premises.
If the premises are owned as a partnership asset or indeed by the partners, or a few of them, in their personal capacities consider i) whether new partners will be expected to buy in, ii) the process for buying an outgoing partner’s share (the means of valuation, the time period over which sums are paid etc.), iii) how notional rents are handled (e.g. will these be payable solely to the property owners), iv) how will repair and maintenance costs be handled – who will be responsible for what?
If the premises you operate from are leased, consider whether the new partner will be expected to become a named party to the same and if so how this is achieved under the terms of your lease?
Robert Day is a senior solicitor at BMA Law
If you need help in drawing up or updating your partnership agreement make the most of your BMA membership by contacting BMA Law on 0300 123 2014 or e mail [email protected]. Set up by the BMA to support its members (and those members of their immediate family), BMA Law provides a range of quality, sector specific, fixed fee legal services. These include:-