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Partnership Voluntary Arrangement (PVA)

Limited Liability Partnership

An LLP has members, not directors, as with a Limited Company. The members of the LLP have limited liability regarding the LLP’s debts. LLP’s may use the same insolvency options, as limited companies. Significant differences in the insolvency provisions Section 214(A) of the Insolvency Act 1986 allow a claw-back of partners’ drawings in certain designated situations.

In that event, partners need therefore to ask advice as soon as possible, when an LLP is in financial trouble.

A Partnership Voluntary Arrangement is known as a PVA

A PVA is a rescue procedure for an unlimited liability partnership. PVA supersedes the agreed terms of the partnership’s existing contracts with its creditors. New terms are within the PVA proposal.

The proposal needs to show that creditors of the partnership accomplish a more favourable outcome when compared to winding up the partnership, which may lead to the bankruptcy of partners. A PVA can be a single insolvency procedure; it may though have an Individual Voluntary Arrangement (“IVA”) attached to each partner.

To do this, you therefore need to demonstrate the viability of the business moving forward. If however this can’t be demonstrated, the partnerships risk being wound up by the Court. Then a further result is the bankruptcy of partners, if they are then unable to discharge the partnership liabilities.

Partnership Voluntary Arrangement and Winding up of a Partnership

Winding up an unlimited partnership using a Court petition is not too different from a limited company. Creditors may serve a statutory demand on the partnership. If it is not satisfied, the petitioning creditor may petition to bankrupt the partners.

With a partnership, assets and liabilities are essential to know who has what and where. Partnership assets realised for creditors of the partnership need to be allocated against those liabilities first. The shortfall is then met the estates of the partners jointly and severally.

HBG ADVISORY assists partnerships as above.

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