A Partnership Voluntary Arrangement (PVA) is a compromise agreement between a partnership and its unsecured creditors for debts which cannot be repaid as and when they fall due which results in the creditors agreeing to a scheduled repayment programme.
What is a PVA?
A PVA is relevant when the partnership is technically insolvent but can return to solvency with the assistance of its overdue creditors. By its very nature, a PVA is a complicated process and the proposal must be detailed in information and ultimately reassure creditors that by supporting the proposal not only are they are getting a better return than if they take action against the partnership but also that this will also ensure the ongoing viability of the partnership. The proposal is bespoke in nature and each PVA can, therefore, contain whatever “offer” to creditors that is appropriate. The most common type is an ongoing monthly contribution for a period of time (usually five years) but this need not be the case. It can include the sale of non-key assets, injection of investment or a combination of all three. However, it must be supported by at least three quarters in value of the debts of creditors that choose to vote on the proposal. If the requisite majority is not reached then the PVA is rejected and the partnership must consider alternative advice. It should also be noted that whilst a PVA may result in the partnership being protected from its creditors, this is not necessarily the case for its partners as individuals who can still be personally liable. As such, the proposal must deal with the partner’s positions as well or the partners must consider whether an Individual Voluntary Arrangement (IVA) may be appropriate to run in conjunction with the PVA.
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