AMAV VICDOC SUMMER 2023 - Magazine - Page 54
JOINING A
MEDICAL PRACTICE
AS AN OWNER
—
Joining an existing medical practice as an owner is a big step, both in terms of
your medical career and your legal responsibilities. It is important to properly
understand what you are signing up to.
NICHOLAS BLACKMORE, PARTNER, KENNEDYS
BECOMING A PARTNER
––
Partnerships require new entrants
to sign a deed which provides that
you will comply with the terms of
the partnership agreement. The
partnership agreement sets out
the terms on which the partners
agree to operate the partnership,
including the distribution of
profits and losses, the rights and
obligations of partners to each
other, termination rights, and what
happens when a partner leaves.
If you are joining an established
partnership, it is usually offered
on a “take it or leave it” basis.
Nevertheless, it is always a good
idea to seek legal advice, to ensure
you understand what you are
getting into.
The most important point
for new partners to understand
is that, by joining a partnership,
you are jointly and severally liable
for the debts and liabilities of the
partnership. This means that if the
partnership runs up a debt, you
will be personally liable for that
debt. If the partnership is sued and
insurance does not cover
that liability, you will also be
personally liable.
BECOMING AN ASSOCIATE
––
Like a partnership, an associateship
is built around an agreement,
which governs the terms on which
the associates agree to operate the
associateship. Unlike a partnership,
the associates in an associateship do
not carry on a joint business. They
run their practices independently
and do not share income or profits.
Their cooperation is limited to
sharing premises and clinical and
administrative support services.
The legal effect of this is that
they are not liable for each other’s
actions, debts or liabilities.
However, practitioners in an
associateship arrangement should
be aware that the associateship
model is relatively untested
by Australian courts. The idea
behind an associateship is that the
practitioners run their practices
separately. However, if the practice
is run more like a partnership –
particularly in relation to sharing of
expenses and joint decision-making
– a court may determine that the
practice is, in fact, a partnership.
BECOMING A
SHAREHOLDER
––
Other practices are run by a
company in which the practitioners
are shareholders and directors.
The service company owns the
practice assets and manages the
business, and provide clinical and
administrative support services
to each doctor. While more
expensive to set up, this model has
the advantage that the company
is a separate legal entity from its
shareholders. The company’s debts
and liabilities can generally only
be satisfied from the assets of the
company. From the shareholder’s
perspective, the only money at
risk is the amount they paid for
their shares.
Most companies have two
documents which govern how the
company is run. The constitution
sets out the basic mechanics of the
company: how shares will be issued,
how directors will be appointed,
how directors and shareholder
meetings will be held and so on.
The shareholders agreement
sets out any more elaborate
arrangements that the shareholders
wish to put in place: for example,
in a medical practice where the
shareholders are also practising
doctors, the shareholders agreement
may provide that a shareholder
must sell or redeem their shares if
they cease working at the practice.
CONCLUSION
––
Regardless of the business structure,
it is important when joining
a medical practice to properly
understand what you are signing up
to. It is always a good idea to seek
your own legal advice regarding the
business structure.
Level 9 360 Elizabeth Street Melbourne VIC 3000 Australia T (03) 9498 6699
54
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