What is a Partnership Voluntary Arrangement? How can it help you?
A Partnership Voluntary Arrangement (or PVA) is a procedure whereby a partnership can continue to trade even though it is insolvent – in other words, by Insolvent I mean there is insufficient cash flow being generated by the business to pay its ongoing liabilities.
A PVA is to be used (rather than a partnership winding up procedure) if the business has already or is likely to return to profitability in the near future and debts can be paid off over an extended period of time. The CVA is a tailored plan to repay to creditors, usually over a 3 year period, what the business can afford to pay.
It should be possible to identify the reasons why the business has got into difficulties and how these problems do not recur in the future.
A PVA is sometimes used if there is good reason to wish to keep the business trading, such as licence agreements or other contractual agreements that could not be transferred to a different business.
We would carry out a full review of the trading position of the business and assess the future trading position. During this review process decisions can be made about any redundancies or other cost cutting steps.
Based on this realistic assessment of the viability of the business we would agree with you the plan that the partnership could afford to put forward to creditors. This is called the ‘offer to creditors’ or more formally ‘the proposals’. In practice, the amount repaid is likely to be less than 100% and may be as low as 25 to 40%.
As part of our work we will speak to your bankers, the taxman and any major supplier to explain the plan in more detail and get their support. These are delicate negotiations and not all Insolvency Practitioners have the experience or expertise to do this.
Once the detailed report of the financial position of the partnership and offer to creditors had been finalised this would be filed in court and a meeting of creditors called.
At the meeting of creditors it would be necessary to have at least 75% of the voting creditors voting in favour of the offer you have made for the CVA to become a binding agreement between the partnership and its creditors.
In practice, so long as the report and offer to creditors has been well thought through it is likely that the creditors will agree.
Up to the point of agreement by the creditors I am referred to as the Nominee and after the creditors meeting I am the Supervisor.
We will make sure that these things happen as quickly as possible, as time in these circumstances is often scarce. It will usually take about 14 days from your initial meeting with us to the report being filed in court. There needs to be a further 14 days notice given to the creditors of the meeting – so it could take as little as 28 days from your first meeting with us to have a fully agreed PVA.
For more free, impartial advice and information on the Partnership Voluntary Arrangement procedure please look at the ‘frequently asked questions’ section or contact us directly.
