Who can present a petition for winding up?
A petition for the winding up of a partnership as an unregistered company can be presented by:-
- A creditor (owed £750 or more)
- A partner
Alternatively, where a bankruptcy order is made against one (or more) partners, but no winding up order is made against the partnership itself, an application can be made either by the Official Receiver, an Insolvency Practitioner or Trustee of any interested person, for an order that the partnership is to be wound up.
Practically, the only reason to make an application for consolidation of proceedings would be to deal with any partnership assets, which would otherwise fall outside the Official Receiver’s control.
How is the appointment made?
Where a partnership is wound up, the Official Receiver will be appointed as Liquidator. Similarly, when one (or more) or the partners are made bankrupt, the Official Receiver will be appointed as Trustee, although it is possible that a licensed Insolvency Practitioner would later be appointed to deal with the insolvent estates.
What is the effect of liquidation?
The partnership is treated as an unregistered company and is therefore wound up in a similar manner to a company. The Liquidator will deal with the assets and liabilities of the partnership itself and has a number of duties, as follows:-
- To realise the assets of the partnership, and any deficiency due on individual capital accounts
- To take possession of the books and records of the partnership
- To deal with creditors and agree their claims
- To make a distribution to creditors in order of priority
Where the partnership estate is insufficient to meet certain (preferential) liabilities, the unpaid balance of those debts will be apportioned equally between the individual estates of the members, and it will be for the Liquidator to lodge claims in these estates as appropriate.
What happens if there is a deficiency in the Partnership estate?
If the partnership assets are insufficient to settle all of its liabilities, then the shortfall must be met by the individual partners themselves, subject to the terms of any partnership agreement. The partners should consider how to protect their personal position and deal with the deficiency.
The partners’ may be in a position where they can fund the shortfall out of their personal funds. If this is not the case, the partners’ will need to consider other options which include (but are not limited to):-
- Individual Voluntary Arrangements
- Debt Management
- Debt Consolidation
The various options must be carefully considered, and the most appropriate solution will depend on the position of each individual partner. Any action taken by one partner can affect those remaining – for example, if one partner is made bankrupt, and there is little or no value in the individual estate, the remaining partners will be liable for the bankrupt partner’s share.
Careful consideration must be given to all options available to a financially distressed business. For more advice, fill out our Contact Form and we will be in touch. Alternatively, call our FREE ADVICE LINE on 0800 781 0990.