Partnership Insolvency – Partnership Voluntary Arrangement (PVA)
The Partnership Voluntary Arrangement was introduced within the Insolvent Partnership Order 1994. It is similar in many ways to the more common Company Voluntary Arrangement (CVA).
Just as with a company in financial distress, a partnership can negotiate a deal with its creditors to give it the breathing space to deal with its problems, either through agreeing debt write offs or deferring payment of liabilities to ease current cash flow restraints. The PVA process is virtually identical to that of a CVA, although it will be the partnership members who will be responsible for drafting the PVA proposals, whereas in a CVA this task falls to the directors.
It is imperative that a PVA is only proposed and agreed where it operates a viable business. The exception would be when the partnership has valuable and readily saleable assets, which can be disposed of to generate cash to pay down debts or provide a short term increase in cash flow while the business is either sold or restructured.
Partnerships facing creditor pressure and cash flow problems should contact Opus so that our specialist partnership insolvency team can help analyse the financial position and give advice on the best way forward.
Alternatively, creditors of a business partnership can cooperate in setting up a PVA to ensure that some or all of their debt is paid rather than waiting for their client to collapse and receiving little or no money back. Opus is also able to advise creditors on this strategy.
Unlike an Individual Voluntary Agreement (IVA), a PVA does not provide the partnership with protection can continue with enforcement action in the period before the creditors meeting that must be called to approve the PVA. Where creditors take action and particularly if the partners have personal assets and liabilities both personally and jointly and severally for the partnership’s liabilities, they may each have to enter into IVAs, which will run concurrently with the PVA.
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