Dissolution of GMS partnerships

NHS England has recently published an update to its Primary medical services policy and guidance manual (PGM). The PGM provides commissioners of primary care services with information and tools to support their commissioning and managing of general medical services (GMS), personal medical services (PMS) and alternative provider medical services (APMS) contracts.  In this article, Alison Oliver and Justine Lee examine important new guidance on how commissioners manage GMS contracts in the event of partnership disputes and dissolutions. 

Summary of changes to PGM

The updated PGM includes a number of new provisions to reflect recent legal changes, including:

• Introduction of the new Provider Selection Regime (PSR) and how this impacts primary care commissioning; 

• The new NHS (General Medical Services Premises Costs) Directions 2024 (PCDs) (see our article on the PCD here; and 

• Recent case law looking at the effect of partnership dissolution on GMS contracts. 

In this article, we look at the new guidance about how commissioners are expected to manage circumstances where there is a dissolution of a GMS partnership with no clear successor to the contract. 

GMS contractor eligibility  

Under the NHS Act 2006, commissioners are permitted to enter GMS contracts with the following categories of person:

• an individual medical practitioner; 

• a partnership comprising at least one medical practitioner and other individuals in the “NHS family” (essentially, NHS healthcare practitioners and NHS employees); and

• a company limited by shares in which at least one shareholder is a medical practitioner and all other shares are both legally and beneficially owned by other individuals in the NHS family. 

Commissioners are not permitted to enter GMS contracts with limited liability partnerships, “LLPs”.

Additional conditions relating to GMS contractors are set out in the NHS (General Medical Services Contracts) Regulations 2015 (GMS regulations).  Except where a temporary GMS contract of not more than 12 months is in place where exceptional circumstances apply, a GMS contract continues without a fixed timescale unless and until terminated in accordance with the terms of the contract.

GMS partnership contractors

The GMS regulations confirm that when a GMS contract is made with a partnership, it is made with the partnership as from time to time constituted and will continue regardless of the retirement, death or expulsion of partners or the addition of partners. Unless the commissioner has grounds to terminate the contract, it will continue indefinitely, irrespective of changes in the partners, as long as all the partners at any one time are eligible to be contractors under the contract and satisfy the conditions in the GMS regulations. It follows therefore that if at any time a partner ceases to be eligible to be a contractor you risk your GMS contract being terminated and you should therefore include provision for such eventuality in your partnership agreement. 

The regulations impose mandatory requirements in every GMS contract which require partnerships to notify the commissioner when partners leave and join the partnership or when the partnership comes to an end altogether. 

Technical versus general dissolution

As a partnership is not a legal entity, every time a partner leaves or a new partner joins the partnership, this brings to an end or “dissolves” the original partnership. In most cases where a GMS partnership dissolves, the practice will be carried on by the continuing partners, together with any new partners. We refer to this as a “technical dissolution” – the original partnership dissolves but a new partnership is immediately formed and continues the business without any winding up of the partnership’s affairs. When the business of the partnership is to come to an end altogether, this is referred to as a “general dissolution” and the affairs of the partnership will be wound up. 

Termination of partnership contracts

There are limited grounds for a commissioner to terminate a GMS contract, including where the contractor has provided untrue information to the commissioner, where the contractor has unlawfully subcontracted its obligations under the contract or where there has been serious breach of the contract which hasn’t been remedied or is not capable for remedy. There are certain grounds for termination which apply specifically to GMS contracts made with partnerships, which include:

• where the partnership is dissolved by order of a court, tribunal or arbitrator; 

• where an event happens that makes it unlawful for the partnership business to continue or for the members of the partnership to carry on in partnership; and

• where one or more of the partners leave and it is the commissioner’s reasonable opinion that the change in membership of the partnership is likely to have a serious adverse impact on the ability of the contractor or the commissioner to perform their obligations under the contract.  

Change of contractor status – partnership to individual 

When a partnership dissolves leaving just one of the original partners carrying on the practice, the GMS contractor is no longer the partnership but an individual. In order for the contract to continue with the sole remaining individual, the regulations require that all the original partners sign and submit a notice to the commissioner of the intention to change contractor status from that of a partnership to that of an individual GP, which must include the name of the nominated  individual GP with whom the contract is to continue. The notice must be served on the commissioner at least 28 days prior to the date the status is intended to change . 

Recent case law

In a recent case, Vikram Bhat and Geetha Bhat (the claimants) sought a judicial review of a decision taken by the NHS Litigation Authority (NHSLA). The claimants had held a GMS contract in partnership with Mrs Patel for some time but that relationship had broken down. They had no valid partnership agreement in place and therefore had no contractual ability to expel Mrs Patel from the partnership – the partnership was a partnership “at will”. 

The claimants were unable to expel Mrs Patel so had served notice on her dissolving their partnership. They notified the local clinical commissioning group (CCG) of the dissolution and carried on running the practice. The CCG concluded that the GMS contract had automatically terminated by operation of law as a result of the dissolution (because not all the partners had signed a notice nominating its continuation with the claimants) and that the claimants were continuing to run the practice under an implied temporary fixed term GMS contract. The matter was referred to the NHSLA and the NHSLA supported the CCG’s position. The claimants then sought judicial review of the NHSLA decision. 

In the original proceedings, the adjudicator concluded that as there was no partnership agreement and the claimants had dissolved the partnership with Mrs Patel, the partnership changes were not by consent and therefore the provisions of the GMS regulations allowing for continuation of the GMS contract with the newly constituted partnership did not apply. It was argued that the partnership changes without agreement of all partners brought about a general rather than a technical dissolution of the partnership. In the absence of the partners giving advance notice that the contract was to continue with the claimants, the adjudicator concluded that dissolution therefore caused termination of the GMS contract. 

The High Court determined that this conclusion was an error: as the claimants had continued to run the practice, there had not been a general dissolution but a technical one and the GMS contract had not terminated automatically. The commissioner would have had to take active steps to terminate the contract for specified grounds (such as the partnership being dissolved by a court order or because of a reasonable opinion that the change in membership would cause a serious adverse impact on the ability of the contractor or the commissioner to perform their obligations). The commissioner had not taken such steps and the claim for judicial review of NHSLA’s decision was therefore allowed. 

Key changes in PGM

The case has raised some questions for commissioners, whose role is not to arbitrate in disputes between partners. The GMS regulations are clear that if a partnership dissolves leaving only one continuing contractor, there will need to be a notice to the commissioner regarding the intention to change from partnership to individual contractor status. 

The grey areas arise where:

• there is a still a continuing (albeit reconstituted) partnership; and/or

• the notice to the commissioner is not signed by all the partners immediately prior to the intended change. 

The revised PGM provides commissioners with additional guidance on managing circumstances where a partnership dissolves without a clear successor having been nominated or when a partnership breaks down to the extent that no clear successor can be identified for continuation of the GMS contract. The revised guidance states that:

• If notice of dissolution is served on the commissioner but not all members of the dissolving partnership sign the notice, the individuals that served the notice (the notifying party) should first be invited to re-submit the notice signed by all the relevant parties. 

• If the notifying party is unable to obtain signatures of all relevant parties, then they may set out a written statement of the circumstances. 

• The commissioner may then consider contacting the other party and inviting them to confirm within 28 days that they have no objection to the proposals of the notifying party.

• If the other party objects to the proposal made by the notifying party, the commissioner will need to consider either:

  • Choosing a successor provider for the GMS contract following a fair and transparent procedure involving the parties (for example the key criteria for selection under the PSR); or

  • Splitting the contract so all parties are considered nominated as successors but are awarded new, separate contracts. This would only be considered if splitting the practice is viable and wouldn’t cause significant disruption or detriment to patients. 

• If no suitable successor can be identified among the original partners, the commissioner may consider terminating the GMS contract in accordance with its terms. The most likely grounds for termination in these circumstances cited in the PGM are:

  • Where there are two or more partners and one or more leave and the commissioner’s reasonable opinion is that the change is likely to have a serious adverse impact on the ability of the contractor or commissioner to perform their obligations; or 

  • Where an order for dissolution is made by a competent authority or an event makes it unlawful for the contract to continue with the partnership. 

Key learning points

The case cited clarifies that dissolution of a partnership at will and failure of all partners to sign the notice to the commissioner regarding the partnership changes does not necessarily automatically result in termination of the GMS contract, even if one or more of the partners do not sign the required contract notices. However, there is a risk that an acrimonious dissolution could result in:

• termination of the contract by the commissioner with grounds (for example because the commissioner believes the change is likely to have an adverse impact); 

• the award of the contract to the partner that the remaining partners were seeking to remove rather than the partners notifying the dissolution; or

• the contract being split between the former partners. 

Issues most commonly arise when a partnership does not have a valid and up to date partnership agreement setting out the circumstances and manner in which individual partners are entitled to leave the partnership or may be expelled. A good partnership agreement should set out grounds for expulsion, procedures for voluntary exit and a requirement for exiting partners to sign such notices and documents as may be required to ensure the continuation of the GMS contract with the continuing partners or individual GP (as the case may be). 

How we can help

Hill Dickinson’s primary care team lives and breathes general practice. We have in-depth understanding of partnership law, dispute resolution and NHS primary care contracts and regulations.

One of the most important steps you can take to improve the stability of your practice is to ensure you have an up-to-date partnership agreement. We prepare bespoke medical partnership agreements which cover the main issues commonly arising in GP practices and help mitigate against the risks of operating as a partnership at will.