Partnership agreements and the ‘Green Socks’ clause

March 22, 2021

What is it?

A ‘Green Socks’ clause is becoming the norm in partnership agreements for GPs and is also increasingly seen for other professionals. Partnership agreements are being specifically updated to add the clause.

The ‘Green Socks’ clause allows expulsion of a partner for no reason at all provided that all the other partners agree – the clause became known as such as expulsion is possible simply because of the colour of the socks.

The clause is intended to address the potential difficulty of justifying specific grounds for serving notice to expel a partner.

How does it work?

The ‘Green Socks’ clause is intended to encourage balance and equal standing between all the partners in a partnership agreement, since each partner knows the clause could be enforced against that partner.

Each partner knows that as well as benefiting from the clause, the partner could also potentially suffer from it. It can be a powerful incentive for an errant and difficult partner to conform.

There are of course caveats – the remaining partners would need to have acted in good faith towards that partner without any element of discrimination.

The partnership would be in a much stronger position than relying on specific grounds for expulsion, which would be dependant upon proving such grounds.

Do you need help with your Partnership Agreement? Get in touch.

FAQs about the Green Socks Clause

Why is it called the green socks clause?

Commonly a partner would need to be in breach of a Partnership Agreement to be expelled from the partnership. However, the Green Socks Clause allows them to be expelled on “no fault grounds”. Or in other words, because you don’t like the colour of their green socks. 

What are the benefits of the green socks clause?

Green Socks Clauses can be a powerful deterrent for a difficult or under performing partner, who will be aware that the Green Socks Clause exists and if the other partners unanimously agree, they can be removed. 

Rather than establishing specific grounds to expel a partner, the Green Socks Clause can strengthen partnerships, as all parties will be aware of the clause. 

Green Socks Clauses are not 100% guaranteed, however and it is best to seek independent legal advice on how to include it in agreements as well as how best to enforce it. 

Can you challenge the green socks clause?

A partner may have cause to challenge a Green Socks Clause if they feel that other partners have not acted in good faith or that they have been discriminated against.

For legal advice on Green Socks Clauses, make an enquiry below.