Resolving practice disputes
Disputes arise even in the most successful practices, and often amongst partners or colleagues who have otherwise worked harmoniously. Topics that commonly cause conflict include decisions about premises, the sale or acquisition of a practice, the accounting treatment of profits and expenses, and the impact of the retirement or under-contribution of a partner.
What can your practice do to minimise the disruption that is commonly caused by these disputes?
Give your practice agreements a ‘health check’
Ensure that your practice agreements contain the ‘rules’ for how important decisions will be made and any disputes resolved.
Have your agreements evolved with your practice? Do they reflect the operational realities of your business?
What are the decisions that will require a special vote of all of the partners? Examples include a decision to re-name or relocate the practice, introduce a new practice area, or acquire or sell property.
Do your agreements set out what must happen when a partner decides to leave the practice or a new partner joins, or how an interest in the practice will be valued?
Good agreements will reduce the possibility of conflict escalating and provide certainty when a quick or unpopular decision is required.
Champion good governance in your practice
Even in a small practice, effective systems and processes are essential. Utilise the skills of your practice manager to establish and champion governance in your practice.
Set agendas for your meetings, meet regularly, and record discussion and outcomes in accurate minutes. In the event of a dispute, these records will be the most reliable evidence of what has occurred.
Provide proper notice of meetings and conduct meetings in accordance with the requirements of your practice. This will reduce the likelihood of a decision being attacked or ‘unwound’ because of a process irregularity.
Many disputes arise because a partner is ‘kept out’ of information. Provide all partners with free and equal access to practice accounts and records. If you believe it is necessary to exclude a partner in order to protect your practice, seek legal advice.
Keep your practice accountant independent, so that all partners have confidence in the accounts when a dispute about financials arises or a valuation is required.
Act quickly when a dispute arises
Most disputes can be resolved without the need for court proceedings. This is especially so when early steps are taken to confine and address a problem.
Your practice agreements should prescribe a mechanism for resolving disputes that do not require urgent legal intervention. Waiting too long to address a problem inevitably makes the problem bigger and more difficult and costly to resolve.
Where a dispute is broad or intractable, identify matters that might be capable of interim resolution while bigger issues are dealt with. For example, it might be possible to preserve disputed funds in a trust account for a period of time, while broader negotiations occur.
A network of trusted professional advisers who understand your practice and can work together to support your business if difficulties arise is invaluable.
This article was originally published in the Summer 2022 VicDoc, which is the magazine of the Australian Medical Association Victoria.