A partnership voluntary arrangement or PVA is similar
to a Company Voluntary Arrangement (or CVA), except that it has been
drafted especially for partnerships rather than limited companies.
A new culture of looking at insolvency was envisaged
by the U.K. government in the 1980s and 1990s which found that it was
best to save businesses if at all possible rather than let businesses
wither away. So the partnership voluntary arrangement and similar instruments
A partnership voluntary arrangement, put simply, allows
the partners to keep control of the partnership while entering into
an agreement to pay the creditors of the business under the terms of
the PVA, which details how the liabilities and debts of the partnership
will be dealt with under the various provisions available in law.
A partnership voluntary arrangement will allow the business,
which may have known cashflow issues over a period of years, to repay
its liabilities either fully or partially over a term of years. The
payments are restructured, any money thus generated (for example, from
book debts) may be then used as a source of working capital. Crown debts
such as monies owed to VAT and HMRC may also be paid off gradually in
this way, so that the cashflow of the partnership can be liberated and
the debts not permitted to squeeze the business.
There are several other ways a business may be helped,
aside from a partnership voluntary arrangement, or even in addition
to a PVA. Other advanced options include the pre-pack, which would separate
the bad parts of the business from the good parts, sell them off and
restart as a new ‘phoenix’ company which is free from the
burden of the old debt.
Also, looked at
it more detail, there is nothing to stop the individual partners looking
into the possibilities of IVAs for themselves as individuals, especially
if they have invested personal assets into the business.
If you would like
to talk about a partnership voluntary arrangement to a specialist with
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