From our experience, it is commonplace for partnership agreements to be put to one side until such time as it is needed. Further, it is not uncommon for partnership agreements to be put to one side whilst they remain unsigned and undated.
However, should you need to rely on your partnership agreement in a dispute for example, an agreement which is out of date is likely to have serious repercussions for the partners and the practice as a whole. This is particularly the case in circumstances where partners have been making adhoc changes to the management of the partnership. The danger from a legal perspective is that your agreement is considered invalid.
We therefore recommend that as a matter of course, your partnership agreement is reviewed on an annual basis, and with the New Year approaching, now is the perfect time.
Regular reviews are necessary to ensure that the terms of the partnership reflect its current practices but also to ensure that it complies with current laws, regulations and general good practice expected in the private medical sector. A partner may dispute the validity of an agreement where the management practices detailed differ to the practices adopted by the partnership daily.
In addition, there are specific situations which should trigger a review of your agreement. One of the most obvious reasons for reviewing your partnership agreement is the retirement of a partner. A partnership deed is a contract made between the parties who sign up to it and the importance of making sure the parties are correct should not be overlooked. Likewise, when a new partner is appointed, the partnership agreement needs to reflect this change. Of course, assuming the terms of the agreement are still applicable, it may not be necessary to agree an amended partnership agreement, but instead, the new partner may execute a Deed of Adherence. We would also recommend that your partnership agreement is updated if you sell your premises or change your profit shares.
The updating and amending process need not be expensive and you can be rest assured that it will always cost less than resolving problems which are likely to arise as a result of allowing your agreement to lapse, particularly in relation to disputes between partners.