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TARGETED PARTNERSHIP VOLUNTARY (PVA) SUPPORT

Running a business as a partnership can be incredibly rewarding, but financial difficulties have the potential to escalate when debts become unmanageable. If your partnership is facing financial pressure, finding the right path forward can be challenging. Our expert team is ideally placed to help you assess whether a Partnership Voluntary Arrangement (PVA) is the best option for your business — and ensure you get the support and guidance you need.

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What is a Partnership Voluntary Arrangement?

A partnership voluntary arrangement procedure is a formal insolvency process between a partnership and its creditors. It is used to restructure and repay debts  across a pre-agreed period of time. This kind of arrangement is typically used when a partnership is struggling to meet financial obligations, but wishes to do what it can to avoid insolvency and liquidation. 

As the name suggests, a PVA is a voluntary process initiated by the partnership itself, allowing the partners to maintain control of their operations while, at the same time, alleviating immediate financial pressures. During the period of the PVA, interest and repayments are paused. This gives time for senior figures to make moves to recover while making manageable payments across the pre-agreed period.

Creditors will often prefer a partnership voluntary arrangement over enforced liquidation and the like, as it offers a higher likelihood of repayment. By allowing the partnership to continue operating, there is a greater chance that creditors will recoup more of the debt over time. In this respect, a PVA compares favourably with the shorter-term gains of compulsory liquidation, where returns are not guaranteed going in, so are usually much lower.  

One of the key advantages of the partnership voluntary arrangement procedure is that it offers some much-needed protection from debt enforcement measures such as winding up petitions — as long as the arrangement’s terms are fully adhered to. For those partnerships looking for a solution to balance the creditor’s demands with the very real need to keep the firm running, a PVA can be an excellent option. However it’s essential that you seek professional advice early in the process if you want to ensure the best outcome possible in the end.

When Is a Partnership Voluntary Arrangement Required?

Partnership voluntary arrangements are typically utilised when a partnership is experiencing severe financial difficulties and is either currently unable, or soon to be unable, to pay its debts. 

While the reason a partnership is facing such serious financial issues will vary from company to company, and sector to sector, the most common challenges preceding them  include market downturns, cash flow issues, and unexpected business disruptions. A partnership may opt for a PVA as it can buy them the valuable time needed to restructure and ultimately recover — in turn reducing the short-term financial pressure. 

However, it’s crucial to only pursue a PVA if there’s a genuine prospect of recovery on the horizon. If the partnership is unlikely to return to profitability, the PVA could merely delay the inevitable slide into insolvency or liquidation. 

Our team provides tailored advice based directly on your unique circumstances, ensuring you have a clear and actionable plan to navigate the process effectively.

How Long Does a Partnership Voluntary Arrangement Last?

Typically, partnership voluntary arrangements will last anywhere from one to five years, and sometimes even beyond. The actual time frame depends on the complexity of the partnership’s financial struggles. 

However, there is no set time in UK law to stipulate how long a partnership voluntary arrangement should last. This means that the actual length of a PVA will vary and is usually dependent on what would be considered a ‘reasonable’ timeframe for both the partnership and for the creditors to achieve the primary goal of facilitating repayment.

While a quicker turnaround will naturally be preferable for all parties, it must always be realistic. There’s no use stretching the truth and setting out overly optimistic terms regarding how much can be paid and over what period. 

If you were to do this and be too ambitious, your arrangement is likely to fail, leaving all parties back at square one. All that will have happened is that valuable time and resources will have been wasted, with virtually nothing to show for it. 

Download our FREE Guide to Liquidation

We appreciate that while a company moratorium will provide vital breathing room in which you can restructure your business and regain some financial stability, it’s essential that you’re prepared for any and all potential outcomes. If your situation cannot be recovered during a period under moratorium, company closure and liquidation may be the next step.

To help you navigate this complex process, we’ve created a comprehensive ‘Guide to Liquidation’. This FREE download details everything you need to know. Even if your current focus is on business recovery via an insolvency moratorium, it’s important that you have a solid understanding of liquidation should your restructuring efforts not come to fruition.

Download our FREE Liquidation Guide today and ensure you’re ready to act, no matter where your financial journey might lead.

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The Partnership Voluntary Arrangement Procedure

The partnership voluntary arrangement procedure is a structured and formal process aimed at helping a partnership in financial distress regain control and avoid insolvency. 

Only by seeking expert guidance early on can you be sure that the process will be handled  as smoothly as possible, while also being compliant with any and all legal requirements. This acts to provide your partnership with the very best possible chance to turn things around, survive, and, ultimately, thrive. 

Here’s a brief overview of how the process works:

Initial Assessment and Consultation

The natural first step in any partnership voluntary arrangement procedure should be an in-depth assessment of the partnership’s financial position. This assessment should be undertaken by an experienced insolvency practitioner.

They will undertake a thorough review of the partnership’s debts, assets, income streams, and liabilities, among other things, in order to determine whether a PVA is a viable option. 

In order to maximise the chances of success, this stage in the process demands detailed, open, and honest discussions.

Develop Proposal

With the initial assessment complete, the insolvency practitioner for your case, in collaboration with the partners, will oversee the preparation of a formal partnership voluntary arrangement proposal. This should outline, in full, the terms of repayment, so will need to include the amount to be paid, expected time frame for repayment, and any other conditions that would need to be agreed upon to avoid ambiguity down the line. 

The proposal sets out how the creditor can expect to be paid across the next few years — as well as putting a time frame on how long the business will have to conduct a full-scale recovery. 

Creditor Approval

Once completed, the partnership voluntary arrangement proposal will then be presented to any and all creditors currently awaiting repayment. Once they have had a chance to review the terms, a meeting will be held for the creditors to vote on whether to agree to a PVA or not. In order for approval, the PVA must have a ratio of 75/25 (by value). 

Should the majority of creditors approve the terms stated in the proposal, the arrangement will become legally binding for all creditors — even those who opposed the terms presented. 

It is important to note that any aggrieved creditors (who may have been outvoted during the approval stage) have the right to formally object to a partnership voluntary arrangement in an attempt to stop it in its tracks. A challenge must be made within 28 days of the beginning of the PVA formally starting, or from when creditors were made aware of the plans. When an objection is made, it then falls to the court to determine if it is “unfairly prejudiced’’ to the aggrieved party, or if there are any irregularities in the partnership voluntary arrangement procedure that would make the entire PVA invalid.

Implementation of the PVA

Once approved, the PVA will immediately go into effect. The most immediate effect of this is that, as per the agreed terms, the partnership will begin making payments as-per the accepted schedule. However, interest on the debt is frozen, and creditors are barred from undertaking legal action during the stated period.

Insolvency practitioners will be on hand to oversee the implementation of the arrangement, ensuring that any payments are made on time and that all parties involved are adhering to the PVA. 

Monitoring and Reporting

Throughout the duration of the PVA, it falls to the insolvency practitioner to oversee and monitor how things are going. They will review the arrangement’s performance and provide updates to creditors. The purpose of this continued monitoring and reporting is to be certain that the agreed plan is on track, and that the aims set out at the beginning are being met — i.e financial health is getting gradually better.

If any issues were to arise during the partnership voluntary arrangement procedure, for example the partnership faced issues with their operation or incomings took a hit and repayment would be impossible for a period, it is possible for adjustments to be made. However, all parties must agree to the proposed changes for them to take effect.

Completion of the PVA

Once the terms of the PVA are met, the time has elapsed, and all creditor payments have been made, the partnership will be officially and immediately released from its debts. 

This stage marks the successful conclusion of the PVA, allowing the business to move forwards as a debt-free operation without fear of imminent insolvency and liquidation.

Inquesta: Supporting Partnerships Through Tough Times

Navigating deep-rooted financial issues can be highly stressful for any partnership, causing cracks to develop between even the most tight-knit teams. However, with the right support, recovery may still be possible. 

At Inquesta, we are on hand to offer partnership voluntary arrangement solutions tailored to you and your unique situation. We will work closely with both partners and creditors in order to create an arrangement that offers the best possible outcome for the key parties involved. 

We have supported businesses of all shapes and sizes, across a wide variety of sectors and industries, to overcome financial challenges and turn things around. 

Our team is ready  to offer the specialist advice and support you need in order to navigate the partnership voluntary arrangement procedure with total confidence and clarity. Set yourself up for the future with Inquesta’s PVA support service.

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Meet the Director

At Inquesta we offer a director-led service. Our dedicated, expert team is ideally positioned to support you through the vital partnership voluntary arrangement procedure. 

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Steven Wiseglass

Director of Insolvency

A co-founder of Inquesta, Steven is a licensed Insolvency Practitioner with over a decade of experience in the field. He is a member of the Insolvency Practitioners Association, Association of Business Recovery Professionals (R3), and his insolvency licence is issued by the Insolvency Practitioners Association. In addition, he sits on the R3 committee of the North West Regional Committee.

Steven specialises in advising directors of small to medium-sized businesses, and has a wealth of expertise in providing the most appropriate advice whatever the firm’s circumstances may be. He has also been instrumental in helping company directors save their business and rebuild them into successful enterprises.

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