A partnership voluntary arrangement (‘PVA’) is a legally binding agreement between the partners in a partnership and the partnership’s creditors to repay them in full or in part and over a period of time, usually up to 5 years.
A partnership voluntary arrangement often includes a realisation of the partnership’s assets and/or a regular monthly contribution of surplus profit and/or a third party contribution that would otherwise be unavailable in the alternative (bankruptcy of the partners).
Unsecured creditors vote on whether or not to accept the proposals for repayment and at least 75% of unsecured creditors, based on value of debt, need to vote in favour in order for it to be approved. Once approved it is legally binding on all partnership creditors and they cannot take further recovery action in relation to their debt.
A partnership voluntary arrangement does not include non-partnership debt i.e. if a partner had personal debts on credit card that did not relate to the business. Likewise a partnership voluntary arrangement does not automatically include personal assets of the partners unless being introduced to help sweeten the deal for creditors.
A partnership voluntary arrangement allow the partners to avoid bankruptcy and retain control over their assets and business, subject to the terms of the proposals.
Contact us if you would like further information and assistance regarding partnership voluntary arrangements. There is no charge for doing so and it is without obligation.