Paul Evans, Senior Associate at Berry Smith LLP, considers the issues surrounding GPs leaving practices and the safeguards that can be put in place to preventing a single partner from being left personally responsible for the liabilities of a practice.
GP Practices across England & Wales are being forced to operate with significant gaps in their workforce due to the recruitment crisis facing the profession.
In the absence of an agreement, when a partner leaves a GP practice, their liability in respect of property loans, lease responsibilities and employee redundancy payments effectively come to an end.
The departing partner’s proportion of the liability transfers to the remaining partners. Such liabilities could be substantial and the remaining partners may be unwilling to shoulder this added burden. This could lead to a potential ‘Domino effect’ of partners exiting the practice due to the fear of being left solely liable for the business.
Last Partner Standing
The term ‘last partner standing’ has been adopted to describe the situation where one partner finds themselves taking on the role of running the practice alone. This could leave that partner being unable to retire and having to face winding up the practice and handing back their core NHS contract. The last remaining partner can be held personally liable for the financial liabilities of the practice.
There are a number of preventative steps a practice can take in order to avoid a ‘last partner standing’ situation.
The best form of defence a practice can have in order to avoid a last man standing situation is a robust, well-drafted Partnership Agreement setting out what should happen on a partner’s retirement.
The Agreement could stipulate a minimum timeframe between partners leaving. Alternatively, the Agreement could limit the number of partners who can retire in any one accounting period. This should avoid the ‘Domino effect’ referenced above.
The Agreement could also set out a reasonable period of time over which leaving partners can be bought out. This would help reduce the financial burden on the continuing partners in the practice as it avoids having to pay out a large lump sum in one go.
The partners could consider making it an option – rather than a requirement – to continue a practice after a partner serves notice to leave. This could make it less likely that there will be resignations in quick succession.
Other practical steps a partnership could consider are;
- taking out insurance to assist in the event of a partner’s death, illness or mortgage default; o
- negotiating a break-clause in the surgery lease in case of a situation where the practice needs to be closed; or
- negotiating joining or merging with an existing practice.
The suggested protections should assist in reducing the underlying concerns of being the ‘last partner standing’. However, we would urge any practice that may face such a situation in the future to seek legal advice on all potential options available to it and to understand the full extent of their responsibilities and liabilities.
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