The insolvency options available to partnerships

10 July 2014

There are a number of options available to the Partners and/or the Creditors, under the provisions of the Insolvency Act 1896, such as:
  • The formal winding up of the partnership as an unregistered company, possibly in conjunction with the bankruptcy of one or more of the partners.
  • A Partnership Administration Order (PA), which is similar to the standard administration order.
  • A Partnership Voluntary Arrangement (PVA), possibly in conjunction with interlocking IVA’s (SIMIVA) of one, some or all of the partners.

A PVA is similar to a CVA (Company Voluntary Arrangement) in that it is a formal arrangement with the partnership’s creditors, for an agreed period and under terms agreed by the creditors. It can also be a useful tool for recovery of the business interests.

In a PVA, unlike an IVA or CVA, there is no protective interim order available, so depending on the pressure from aggressive creditors at the time, an administration order is first obtained to provide protection to the partnership.

Once a PVA is approved, the partnership is protected from the actions of its creditors, so that it can:

  • Continue its business for the period agreed and Recover
  • Make future profits and payments to the creditors
  • Realise assets on better terms than via a “forced” sale

It is important a PVA, or indeed a CVA, is not sought unless the business is viable or is asset rich. Partnership law is complex and protecting partner’s personal assets can be complicated

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