Identifying The Best Way Forward
Partnerships differ from limited companies in that the partners are personally liable for any debts incurred by the business. Therefore, this formal insolvency procedure is ideally used in conjunction with personal insolvency procedures, to protect both the assets of the partnership and the individuals who act as partners.
The PVA is a useful insolvency procedure for viable partnerships which are having financial difficulties in the short term and need breathing space.
It enables the business to reach a constructive agreement with all its creditors whereby a percentage of debts owed to them are repaid – either through the sale of business assets or from future income of the partnership.
The amount that is repaid eventually will depend upon what the business can afford, coupled with what the creditors will agree to. All the creditors are treated the same with respect to the percentage of debt that is repaid and at least 75% of them must agree to the arrangement. In may cases, there will be outstanding monies owed to all creditors that will be written off and never paid.
This constructive solution enables the partnership to move forward as a viable business, continuing to do business with creditors who may themselves be compromised if the partnership ceased to trade.
Voluntary arrangements are supervised by a licensed insolvency practitioner who is nominated in the first instance by the partnership, followed with full ratification by the creditors.
At Augusta Kent, we have extensive experience of these types of procedures and will be able to help you find the best route forward. Contact us for your free initial consultation to see how we can help your business.
Sole traders are personally liable for their businesses debts. As such, personal informal and formal insolvency procedures can be explored in this case. Please see information on personal insolvency found on our website or information leaflets to find out more or contact us for your free initial consultation.