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Partnership Voluntary Arrangement
What Is A Partnership Voluntary Arrangement?
Partnership Voluntary Arrangements ("PVA") were introduced within the framework of the Insolvent Partnership Order 1994 and although now 8 years old remain in the context of the world of business recovery and insolvency a fairly recent addition to legislation. PVA’s are modelled on the Company Voluntary Arrangement ("CVA") procedure and not as one might expect on Individual Voluntary Arrangements ("IVA"). The significant impact of this is that no protection is offered to the Partnership by means of the moratorium granted by the Interim Order procedure in IVA’s and for this reason in particular, the procedure is rarely used except in handling the affairs of Partnerships with a significant number of members.
Who can benefit from it?
PVA’s are applicable to Partnerships, which the courts in England and Wales have jurisdiction to wind up. The procedure is mainly used for Partnerships with a significant number of members who wish to avoid the consequences of bankruptcy as well as excluding personal assets from any arrangement and for which the interlocking IVA procedure would become particularly complicated. In particular the procedure is well suited to medium to larger sized professional practices who have not incorporated and continue to trade as a Partnership.
The Procedure in Brief
The procedure is virtually identical to that of a CVA, (see CVA section within this website). Clearly however, the proposals for the PVA are drafted by the members of the Partnership rather than the directors of the company.
Key Components For A Successful PVA
In addition to the key components contained within the CVA section, unless the Partnership Deed specifies the requisite majority of members required to vote for a resolution in favour of formulating proposals for a PVA, it is likely that all members would be required to consent to it. Given that the Insolvent Partnerships Order is only 8 years old it is suggested that many Partnerships pre-dating this may not have updated their Partnership Deeds to reflect the change in legislation.Advantages of a PVA
The PartnershipOnce approved provides a breathing space to enable the reorganisation and restructuring of the Partnership.
Costs are significantly less than if the Partnership was wound up as an unregistered company or placed into Administration.
The Partners
The Partners remain in control of the day to day affairs of the Partnership.
Avoids the stigma of bankruptcy. (see bankruptcy section within this website)
Provides Partners with continued income.
Creditors
Can provide opportunity for better return to creditors than if the Partnership were wound up.
If continued trading of the Partnership is envisaged, enables creditor at its discretion to continue a trading relationship with the Partnership benefiting from future sales.
Disadvantages of an PVA
See disadvantages of CVA section of this website