Partnership Insolvency – Partnership Liquidation
The winding up of an insolvent unlimited partnership is a more complex matter than with a limited company, although there are many similarities between the conduct and practicalities of the processes involved. It may involve parallel action to deal with the affairs of some or all of the members of the partnership by declaring them bankrupt.
The comments here do not apply to a Limited Liability Partnership (LLP) which would be wound up as though it was a limited company, either by way of a Compulsory Liquidation or a Creditors’ Voluntary Liquidation.
There are five ways to wind up the affairs of an insolvent unlimited partnership:
- Winding up the partnership as an unregistered company on the petition of a creditor or a third party such an insolvency practitioner but without concurrent petitions for the bankruptcy of its individual partners.
- Winding up the partnership on a creditor’s petition with concurrent petitions for the bankruptcy of one or more of its partners.
- Winding up the partnership on the petition on the petition of a partner with no concurrent petitions against the partners.
- Winding up the partnership on the petition of a partner with concurrent petitions for the bankruptcy of all of its partners.
- Joint bankruptcy petitions against all of the individual partners but with no petition against the partnership itself.
A petition for winding up by a creditor must be for the recovery of a debt of £5,000 or more. It can only be served after a Statutory Demand has been issued and the debt has not been paid or a settlement agreed.
Where one or more of the individual partners is a corporate entity, instead of a petition for its bankruptcy, a winding up petition against it will be necessary.
The decision on which of the various winding up options for an unlimited partnership to take must be based on a careful analysis of who owns its assets and who is responsible for its liabilities, as well as the separate financial positions of its partners. Opus Restructuring is well qualified to assist in this difficult and often highly complex assessment and to recommend the best way forward for the partnership, its partners and its creditors.