The Business Debt Advisor

Partnership Voluntary Arrangement (PVA) - Process

 
WHO CAN APPLY FOR A PVA?

The partners of an insolvent partnership may propose a PVA. Depending on the Partnership Deed, it is likely that unanimous approval of all partners is required.

Also where the partnership is subject to other insolvency proceedings an application could be made by an Administrator, Liquidator or Trustee.

HOW IS THE APPLICATION MADE?

Initial Fact Find
We need to find out as much as possible about the partnership, including details of its assets, its debts and causes for the build up of debt.
Trading and cashflow projections will need to be prepared to establish that, free of debt, the partnership can fund trading and can trade profitably. Don't worry we will assist.

Proposal
Once we have established that a PVA is viable and is likely to be considered favourably by creditors, we will prepare proposals which set out how the arrangement will work, what payments creditors will receive and how the assets of the partnership are to be dealt with.

An example proposal could be that the partnership makes contributions of £2,000 for a period of 5 years in full satisfaction of its debts.

Nominee's Report
The PVA procedure can only be administered by Licensed Insolvency Practitioners. In the period prior to the creditors' meeting, the Insolvency Practitioner acts as Nominee. After the proposals are complete, the Nominee needs to prepare a report on the proposals which includes comment on the due diligence they have undertaken to ensure that the PVA proposals are accurate, reasonable and achievable.

For smaller partnerships it is now possible to possible to apply to Court for protection from creditors taking action. This gives the partnership "breathing space" in which to propose and implement a PVA without the threat of proceedings from creditors. This procedure does, however, require advertisement. For larger partnerships, protection from creditors may be obtained by use of the Administration procedure.

A copy of the proposals and the Nominee's report will be lodged in Court and distributed to the company's creditors.

Creditors' and Partners' Meetings
A meeting of the partnership's creditors will be held to consider whether to approve the proposals.
The partnership's proposals will be approved if in excess than 75% of its creditors, WHO ARE ENTITLED TO VOTE, agree to support the arrangement. Consequently if just two creditors submit proxies (voting forms) and both of them agree to support the company's proposals, this constitutes 100% approval from those creditors who are ENTITLED TO VOTE.

A meeting of the partners is held immediately following the creditors meeting to consider the proposals. The partners must then decide whether they can agree to the proposals and any modifications that creditors may have suggested.

WHAT IS THE EFFECT OF A PVA?

A PVA provides a legal mechanism which will help the partnership to settle its debts and return to profitability. Interest and charges on unsecured debts are frozen.

Once your creditors approve the proposal, it binds them and they cannot make any further demands on the partnership. However, additional procedures may be required if the partners' personal assets are at risk from personal creditors.

WHAT HAPPENS WHILST THE PARTNERSHIP IS IN A PVA?

If appropriate we will set up a standing order for the payment of the partnership's monthly contribution into a designated bank account.

At quarterly intervals we will request management accounts to be provided to enable us to monitor the partnerships trading. This is to check that ongoing creditors are being paid and also to review whether the level of any contribution payable is appropriate.

Each year we are required to report to creditors and the partners. A copy of the report is lodged at court.

As soon as sufficient funds are accumulated, and the claims of creditors have been agreed, we will make dividend payments to creditors. This usually means that creditors will receive a payment each year, provided the partnership adheres to the terms of the proposal.

As long as the partnership continues to adhere to the terms of the arrangement, creditors, whose debts are not secured and who are partnership creditors, cannot pursue the partnership any further for the recovery of their debt.

The partners will have peace of mind and can now concentrate on the task of ensuring the partnership can trade profitably instead of constantly fighting fires.

HOW IS THE PVA BROUGHT TO AN END?

After the partnership has met all the terms of the proposal, a PVA is brought to an end by a Certificate of Completion and report being issued by the Supervisor to all creditors and partners and being lodged at court.

 

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.