The ‘Green Socks’ clause

Thumbnail_PNBWe have seen a rush of clients requesting amendments to be made to their Deed to include a ‘Green Socks’ clause, even without there being another reason to update the deed.

Due to the potential difficulty of justifying specific grounds for serving notice of expulsion on a partner, a ‘Green Socks’ clause provides an alternative means of parting company with a partner. It is referred to as a “Green Socks” clause because it is possible to expel a partner for no reason at all – simply because you do not like the colour of their socks!

How did it come about?

The introduction of a ‘Green Socks’ clause is considered to be wise in order to create a degree of “balance” between the partners against the background that each and every partner knows it could be enforced against him.

The purpose is that each partner is considered of equal standing therefore knowing that they can benefit from the clause but also potentially suffer from it. It can be a powerful deterrent for an errant and difficult partner to “tow the line” against the realisation that notice could otherwise be served against him/ her!

That being said, there are two caveats where a ‘Green Socks’ notice could be challenged – the first where a partner can demonstrate his partners have not acted in good faith towards him and the second where there is any element of discrimination involved.

The clause is not ‘100%’ guaranteed to succeed but it does put the partnership in a much stronger position than simply relying on specific grounds for expulsion (which is wholly dependant upon establishing the grounds relied upon are proven).

Of course, it is always advisable to take legal advice prior to exercising the ‘Green Socks’ clause in your Deed to ensure that firstly whether you could be exposed to a challenge and secondly that it is served correctly in accordance with your Deed.

Continue reading further articles from our newsbrief: The five year forward view for GPs, premises costs directions, refurbs and lease extensions and employment changes you need to know. Read up on 8 reasons to make a Will, your surgery premises, retirement or death of a partner – planning ahead for your surgery, the ‘Green Socks’ clause and buying a retirement property abroad.

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