It is important that a PVA is only used where a partnership’s business is viable, or where it has disposable assets. A Partnership Voluntary Arrangement is a powerful tool (similar to a CVA) for the restructuring of a business. However each Partner (unlike Ltd company Directors) has an individual personal liability for all the creditors of the partnership. This is “Joint & Several” liability and a partnership creditor can sue a partner in his individual capacity.
To manage this problem of “Joint & Several” liability, an individual partner can also propose an “Individual Voluntary Arrangement” IVA, either alone or by having an “interlocking” individual voluntary arrangement with the other partners.
A Partnership Administration Order and the protection that offers can be granted by a court, provided it is satisfied that the order would achieve one of the following.
- The acceptance of a PVA, under which the partnership debts are restructured.
- The continuance of the partnership as a going concern.
- A greater realisation of the partnership assets than would occur in a winding up.
Once a Partnership Administration Order is granted all creditor action against the partnership is frozen and an Administrator is appointed to deal with the management of the business and its affairs, in accordance with a pre-arranged plan (or pre-package)