What is a Partnership Voluntary Arrangement (PVA)?

A PVA is a formal agreement between a partnership and its creditors. It allows you to restructure your debts and continue trading, even if your business is currently insolvent. Think of it as a financial lifeline that can give your partnership the breathing space it needs to recover and thrive.

Here’s why a PVA might be right for you:

  • It halts creditor pressure, giving you time to focus on turning your business around
  • You can continue trading while repaying debts at a more manageable rate
  • It often results in a portion of your debts being written off
  • It helps you avoid more drastic measures like bankruptcy or liquidation

While PVAs can be used for both traditional partnerships and LLPs, they offer particularly valuable protection for traditional partnerships by shielding individual partners’ assets from creditors once the PVA is approved, a benefit that’s less critical for LLPs which already provide limited liability.

In the following sections, we’ll delve deeper into how a PVA works, its benefits, and whether it’s the right choice for your situation


How a PVA Works

Here’s how it typically unfolds:

  1. You’ll work with an insolvency practitioner to draft a proposal. This outlines how much you can afford to repay and over what period, usually spanning three to five years.
  2. The proposal is then presented to your creditors. They’ll review the terms and decide whether to accept them.
  3. A creditors’ meeting is held, at which a vote is held. For the PVA to be approved, at least 75% (by value) of the voting creditors must agree to the terms.
  4. If approved, the PVA becomes binding on all creditors, even those who voted against it or didn’t vote at all.
  5. You’ll make regular payments to the insolvency practitioner, who distributes the funds to your creditors as per the agreed terms.

It’s important to note that while a PVA is in place, your partnership retains control of the business. However, you must adhere to the terms of the arrangement. Failure to do so could result in the PVA being terminated, potentially leading to more severe consequences like bankruptcy or liquidation.

Benefits of a PVA

When you’re grappling with financial challenges, a Partnership Voluntary Arrangement can offer significant advantages for both your business and your creditors. Let’s explore these benefits to help you understand why a PVA might be the right choice.

For your partnership:

  • Breathing space: A PVA halts creditor pressure, giving you valuable time to focus on turning your business around.
  • Continued trading: Unlike liquidation, a PVA allows you to keep operating your business, preserving jobs and maintaining client relationships.
  • Debt reduction: A portion of your debts will be written off at the end of the PVA term.
  • Flexible repayments: The arrangement can be structured to match your cash flow, making repayments more manageable.
  • Protection from legal action: Creditors can’t take further legal action against your partnership while the PVA is in place.

For your creditors:

  • Higher returns: Creditors often receive more money through a PVA than they would if your partnership were to be liquidated.
  • Certainty: Regular payments provide creditors with a predictable income stream.
  • Continued business relationship: By supporting your recovery, creditors may retain a valuable customer for the future.
  • Avoid liquidation costs: PVAs are generally less expensive to administer than liquidation, potentially leaving more funds for repayments.

It’s worth noting that while a PVA can offer these benefits, it’s not without its challenges. You’ll need to stick to the agreed terms, which may require tight financial management and potentially difficult decisions about your business operations.

When to Consider a PVA

While every situation is unique, several key indicators suggest that a PVA might be the appropriate course of action for your partnership.

Consider a PVA if:

  • You’re facing mounting debts that you’re struggling to repay
  • Creditors are threatening legal action
  • Your partnership is technically insolvent but has the potential for recovery
  • You need time to restructure your business or improve cash flow
  • You’re relying heavily on credit to meet day-to-day expenses

How much Does a Partnership Voluntary Arrangement cost?

Only a Licensed Insolvency Practitioner can act on behalf of a partnership when entering into a PVA. Up to the point of the creditors’ meeting, they are known as the ‘Nominee’. Once the PVA has been agreed, the IP becomes the ‘Supervisor’.

The fees for the Nominee and the Supervisor are separate. The Nominee’s fee is agreed with the partners when the IP is instructed to proceed. This depends on the complexity of the case and can cost as little as £2000. The Supervisor’s fees are usually fixed by the creditors and are paid annually. These would usually be around £3000 to £4000 each year.

How can we help?

If you’re considering a Partnership Voluntary Arrangement as a potential solution to your debt problems, we can provide the no-obligation advice you need. Call 0800 074 6757 to discuss your circumstances with our team.