What is a Partnership Voluntary Arrangement?
A PVA is a procedure whereby a partnership can continue to trade even though it is insolvent – in other words, the partnership cannot meet its ongoing liabilities from the cashflow that is being generated from the business.
Why Use a Partnership Voluntary Arrangement?
A PVA is to be used (rather than a Partnership winding up procedure) if the partnership has already, or is likely to return to profitability in the near future and the debts can be paid off over an extended period of time. The PVA is a tailored plan to repay to creditors’, usually over a 3 year period, what the partnership can afford to pay – typically, this is between 25 to 60 percent of the total debt.
A PVA is a legal, binding agreement between the partners and the partnership creditors’.
A PVA works in a similar way to a Company Voluntary Arrangement (CVA).
The Offer to Creditors
It should be possible to identify the reasons why the business got into difficulties, and help these problems to not recur in the future. We would carry out a full review of the trading position of the business, and assess future trading. 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 a 100%, and maybe as low as 25 to 40%.
We Handle All Your Negotiations
As part of our work we will speak to your bankers, the taxman, and any major suppliers 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 on the financial position of the partnership and offer to creditor has been finalised, this will be filed in court and a meeting of creditors called.
Becoming The Supervisor
At the meeting of creditors it will be necessary to have at least 75% of the voting creditors voting in favour of the offer you’ve made for the PVA 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’s likely that the creditors will agree. Up to the point of the agreement by the creditors the Insolvency Practitioner is referred to as the nominee, and after the creditors meeting referred to as the supervisor.
28 Days For the Full Process
We will make sure that these things happen as quickly as possible, as time in these circumstances is often scarce. It will usually take around 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 at the meeting. So it could take as little as 28 days from the first meeting you have with us, to a fully agreed PVA.