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A Partnership Voluntary Arrangement (PVA) is formal arrangement between creditors and the partnership, allowing a proportion of debt to be paid back over time. If the partners believe in the fundamental viability of the business and are determined to fight for the business to help survival, then a PVA can be a powerful tool or framework for the restructuring of the business.

It must be understood that this mechanism is not easy; the partners must be prepared to prove viability of the business and the partners estates must be solvent prior to the PVA being proposed. Above all, the partners need to be determined and united to make this technique work.

So what is a partnership voluntary arrangement (PVA)?

The best way to think of an Partnership Voluntary Arrangement (or the very similar CVA) is as a deal between the debtor (the partnership that owes the money) and the creditors; the people or businesses to whom the money is owed.

Where the debtor cannot pay off its debts on time or they are insolventĀ or if your partnership is under huge pressure and you personally cannot deal with the partnership and individual partners creditors satisfactorily, than a SIMIVA can often be a good solution.

Making a payment on a regular periodic basis the partnership and the individual debtors can bring together all of his or her debt problems (except where the creditor has security such as a mortgage over property) and get on with their business and their lives.

Who should use a PVA?

It is imperative that the PVA is only used where a partnerships business is viable or where it has disposable assets that can be turned readily into money in the short to medium term. Using the PVA can allowed time to sell such assets for better value than a liquidator or bankruptcy trustee can obtain.

If the business isn’t viable it should be wound upĀ as soon as possible and individual bankruptcy initiated if required. If your business is a limited liability partnership a PVA can be a very powerful tool.


If you have a limited liability partnership in trouble you can use a PVA and still practice!

Partnership Voluntary Arrangements – A Guide

Debtors who run small or not so small businesses partnership can often find themselves in a position where the business is struggling financially.

Most small businesses in the UK suffer from being undercapitalised at some stage. It may be that you did not have enough money to start a business off, that the bank or other financial providers are unable to fund you to the level you needed; or that you have had bad debts: failed contracts or simply have not managed to get the business to a level of making profits yet.

The partnership is usually under extreme cashflow pressure and cannot manage the problem. Business is suffering because the partners are firefighting and not concentrating on running the business. This can become all-consuming. Dealing with irate creditors is also a very tiring and a lonely process. This can often lead to a downward spiral towards the closure of the business and bankruptcy of the individuals.

If you have decided that the PVA is the most appropriate route, make a list of all of your creditors. Don’t make the mistake of saying a creditor isn’t due for payment now, include all current and future debts.

For example, we often meet partners who have habit of “compartmentalising” their debts. An example is: they know the VAT isn’t due until the end of the month after this and therefore they don’t see it as a liability. It IS a liability now and one should estimate to an appropriate point in time (say the end of the current month) how much is due to every creditor.

It is possible to estimate these debts because sometimes its impossible to make detailed and exhaustively accurate lists. The law allows for an estimated statement of your debt to be used as the basis for preparing a proposal to deal with that problem.

Then make a list of all of the partnerships assets and all of the individual partners assets. Put reasonable values on them and if you cannot ascertain values for assets estimate try getting an idea from similar assets or priced assets. (Use the internet to get car valuations etc). The law doesn’t envisage you going out get professional valuations for every asset because this would be too time-consuming and costly.

Perhaps the most important process to go through is to look dispassionately at the business and decide whether it is viable. Decide whether there is enough activity for your business to be profitable with its current overheads or if it were to be restructured.

Often it can be just down to removing a couple of problem areas which if resolved could lead to the business being viable. If so we can help in such a restructuring call us on 0800 9700539 for assistance.

If however the business has never made profit, sales are not rising to the level where overheads start and known prospects aren’t great then a PVA is not suitable.

Now that you have established the true position the business’ debtors, creditors and its viability you should consider the PVA process. If you wish to discuss your information contact us or any local insolvency or turnaround practitioner. We will talk you through the issues of viability, determination and ability to structure a deal free of charge. Call now.

Once a decision is taken to go ahead you will need to appoint a turnaround advisor and or a nominee. An advisor would assist you in building the proposal, collating all the necessary information and dealing with all of the aggressive and passive creditors. The advisor may also seek to discuss the position with your bank and secured lenders, and HMRC. At some stage however a nominee is necessary. A nominee is a short name for the nominated supervisor – this is a licensed insolvency practitioner for licensed by the DBIS and is usually a chartered accountant in this country.

The nominee’s job is to review the proposals of the debtor produced either by the debtor himself or by the advisor in conjunction with the debtor. If he can satisfy itself that the proposals maximise creditors interests, are achievable and realistic he or she will put their name to the proposal and sponsor it to the court and to the creditors. It is important to remember that the proposal will be your proposal and that you have to swear an affidavit saying that is true incorrect to the best of your ability.

Writing the PVA proposal

The law envisages that the debtor(s) will write the proposal and then ask an IP to act for him or her. Of course the legal process is complicated and you have a business to run. Therefore it is probably best to use experienced, pragmatic and respected Turnaround practitioners or insolvency advisors to help you write the proposal. Regardless of whom you use the following points should be remembered:

  1. Base it on sensible cashflows, sales and costs. Don’t guess, don’t expect large increases in sales.
  2. Expect that things in the first year will be a difficult and that sales mean indeed fall.
  3. As a result expect to suffer in the first year and do not promise to make large payments in the first year the maximum amount in we would usually allow most debtors to repay in the first year is 12,000 for a partnership or less for an individual debtor.
  4. Don’t promise too much but as above make sure it repayments are affordable.

PVA Proposal contents

The proposal should include a current description of why the business has failed and why it is insolvent. It should also detail what the structure of the deal is and how the creditors are going to be repaid. To help the creditors decide whether to accept the PVA it must contain what is called a statement of affairs. Or SOFA for short. A SOFA paints a picture of your financial position and demonstrates that you are insolvent. It will also show what would happen if you went into liquidation and what the outcome would be if the PVA were approved and successful.

The document will describe how long the deal is for. Typically most VA’s last between three and five years. And the document will describe how much the partnership will pay from the business in the months and years ahead to its creditors.

After the document has been completed and the affidavit sworn it can be filed at court. The purposes of this are to ensure that the document that is filed at court is the same that is circulated to all creditors and to apply for a moratorium (called an interim order) to protect the debtor in the period between the application to court and the date of the creditors meeting.

Once this process has been completed a creditors meeting is called which can be held virtually by video conference.