The Business Debt Advisor

Partnership Voluntary Arrangement (PVA) - FAQ's

 
Do my personal assets need to be included?
This depends on the terms of the partnership agreement. If the partnership can generate sufficient monies, either from the sale of assets or contributions out of profit to produce an acceptable dividend to creditors, your personal assets will not necessarily need to be included.

Do I need to inform the partnership's bank of the proposed PVA?
If the partnership owes the bank money you must inform the bank as a creditor of the partnership.

In any event, it is likely that the bank's support will be required to assist the partnership's trading and it is recommended that your bank manager be kept advised of the position.

We frequently attend business or bank premises to assist individuals in meetings with their bank manager.

Do I need advise all the partnership creditors or can I deal with some creditors separately?
All partnership creditors, at the date of the proposal, must be provided with notice of the creditors meeting and be dealt with equally. If creditors are not dealt with equally, there is a risk that creditors will reject the proposal for a PVA or challenge the PVA if accepted.

There may be essential payments that need to be made to ensure that business can continue to trade e.g. to suppliers of unique products. These are known as “force majeure” and can be usually be justified to protect the business.

Who can find out about the PVA?
The proposals for a PVA are circulated to creditors, partners and a copy is lodged at the court having jurisdiction in the partnership's trading locality or alternatively at the High Court.

Unless immediate protection is required from creditors, a PVA is not advertised.

Partnership documents, letters etc do not need to state that the partnership is subject to a PVA.

Can a PVA offer protection from creditor action?
The partnership is protected from action by unsecured creditors of the partnership as soon as the proposals for a PVA are agreed at meetings of creditors and members.

Until this time the partnership is vulnerable to creditor action. If there are pressing creditors who can not be persuaded to delay action, an application should be made for a moratorium prior to a PVA or an administration order. A moratorium or administration order must be advertised.

We can assist in negotiating with creditors on your behalf.

What happens if some creditors don't vote?
Once approved the terms of the PVA are binding on all creditors who would have been entitled to vote at the meeting of creditors even if creditors did not get notice of the meeting and did not vote. Thus the unknown creditors are bound by the arrangement.

What is the attitude of the Inland Revenue and Customs and Excise?
The Crown creditors lost their preferential status as of 15 September 2003 and so now they rank as an unsecured creditor. This is far better from other creditors' perspective as previously it could have taken several years to amass sufficient funds in a PVA to clear the preferential creditors. Unsecured creditors quite often had to wait 2 to 3 years before they saw a return.

It was thought that the Crown creditors would take a much tougher approach to PVA's but this has not really happened. They are however, less likely to support a PVA where the partners have, in the past, repeatedly failed to ensure that they settled PAYE/NIC and VAT and also failed to file tax returns. It is possible to seek a view from the Inland Revenue's Voluntary Arrangement Unit in Worthing on whether they are likely to support a PVA.

 

The Next Step

The options for a financially distressed business need to be very carefully considered. Simply forward your details on our Contact Form and we will contact you. Alternatively ring us on our FREE ADVICE LINE 0800 781 0990.