Pharmacists looking at a GP partnership must protect their rights
Pharmacists considering joining up with a GP surgery as a partner should sign a partnership deed to ensure their rights are protected, according to a leading health and social care law practice.
Ross Clark from Hempsons told the Clinical Pharmacy Congress on Friday (May 13) that without a deed in place, which governs how GPs and pharmacists work in partnership with one another, there is no right to expel a troublesome partner and anyone can dissolve the partnership “on notice to the other.”
He also said that without a deed, the arrangement can fall into something called ‘partnerships at will’, which are highly unstable and governed by default statutory provisions.
“When a new partner joins, [that] partner should be sitting down with the agreement, with the new partner’s name added, and everybody signs that,” Clark said.
“There’s a shortcut they can sometimes sign called a ‘deed of admission’, a one-page document, that lists everybody and says ‘we agree that partnership deed will apply to all of us’ – and everybody signs that.
“If that’s not done, that partnership deed doesn’t apply and that happens so often where GPs are busy, a new partner is admitted, weeks go by, months go by and suddenly it’s ‘we’ve got a deed, the new partner hasn’t signed it. It’s not binding and there can be real issues, especially if a dispute develops in the partnership.”
Clark set out the key elements of a partnership deed: probationary partner provisions establish a trial period giving both parties a chance to assess whether each is a good fit for the other; partnership assets and capital injection list the assets that are included as “partnership assets.”
Clark said: “The main thing you want to look out for is property. Is there a property within the partnership or is it held separately outside the partnership? The surgery premises may be leased from partners but they’re owning it separately and they’re leasing it to the practice – so you want to look at that because if you’re buying into a partnership which includes the surgery assets, that will have quite a high value and you might need a high buy-in if you’re buying into a share of the property.”
Sharing of profits and liabilities, he said, may be on a “sessional commitment basis” in many GP practices. “As a pharmacist, you may be given sessions, working eight or 10 sessions a week, Monday to Friday, two sessions a day or be allocated nominal sessions to give you an equivalent.”
Clark said in most cases, “liabilities are shared in the proportion in which profits are shared, one follows the other” although he cautioned that “sometimes it’s not on a sessional basis, sometimes it’s on a percentage basis – partner one, 10 per cent, partner two, 24 per cent – and sometimes it’s called a ‘lock-step’ where you don’t move to full equity. So four partners might end up holding 25 per cent each but a new partner might start at 10 per cent and build up to full equity over five years. That allows you to put capital in in drip-feed.”
Drawings, Clark said, are linked to profits and liabilities. “You are no longer an employee, so you will not get a salary paid to you every month but drawings are the equivalent of that,” he said.
“As a partner, you share in the profits but you don’t know what your final share of the profits will be until the end of the year when all the final profits are calculated. But in the meantime, you get a monthly drawing which is the amount paid to you each month on account of your profits.”
However, he warned pharmacists that “in the event the partnership makes a loss”, they will have to repay that. “In most cases, your drawings will be less than the expected profit, so at the end of the year, if you’ve had £80,000 worth of profits, it turns out your profit share is £120,000, so you are entitled to another £40,000 beyond the drawings you’ve taken.”
Clark urged pharmacists to be aware of the Partners’ duties and restrictions section which normally contains the fiduciary duties that apply to a partnership and leave/authorised absence.
“The important point is, not the annual holidays, but sickness and maternity leave – do you get your drawings during the period of absence? Secondly, who pays for the locum during your absence? If you’re off sick, you’ll probably need a locum to replace you,” he said, warning the cost of a locum can be allocated against a pharmacist’s profit share.
He also said that if a pharmacist is off for a “significant” period of time, their entitlement to profit can stop and they can be expelled from the partnership.
The decision-making section, he said, contains important information about voting and how many votes a pharmacist can have in a partnership, while exit contains retirement clauses and mechanisms on expelling a partner. Clark, however, said it can be difficult to prove certain behaviours have brought the partnership into disrepute. Finally, the entitlement of outgoing partner section sets out what a partner gets if they leave.
Clark said “many GP partnerships” have a partnership deed in place but do not realise it is “not current or has not been signed and is not up-to-date.” The consequences of that, he said, “could be severe.”
He insisted that for pharmacists, the “most important stuff is not the contents of the deed” but to make sure there is a deed and to think about who they are going into partnership with.
“Who are they individually? How do they function as a partnership? Is it a partnership that runs well and everyone’s happy?”
Independent Community Pharmacist asked Clark and English Pharmacy Board chair Thorrun Govind, who took part in the talk, if they had heard of any GPs pressurising community pharmacists to join their surgery. Both said they had not.