Partnership Insolvency
At Chamberlain & Co, we understand that facing the insolvency of a partnership in which you are a partner can be an overwhelming and challenging experience. Our team of highly experienced Insolvency Practitioners are here to provide expert guidance and support to ensure the best solution is identified and implemented. With our personalised approach and commitment to finding the best solutions, both for you, your partners, and the partnership, we will help you navigate the complexities involved and achieve the most favourable outcome for all concerned.
The partnership could be either a traditional unlimited partnership (“Partnership”), or the more common Limited Liability Partnership (“LLP”). The structure of a traditional partnership usually means the partners have unlimited joint and several liability for all liabilities of the partnership; with an LLP, the partners are not usually liable unless they specifically consented to it. The available insolvency options differ for the two different types of partnerships.
The reasoning for the formation of the Partnership or LLP can be lost in the mists of time but they can often concern professional services such as solicitors, accountants or other professionals; or they could be family members, therefore the effect of an insolvent partnership could be even more significant.
Partnership Insolvency services
Comprehensive Consultation and Assessment
Our partnership insolvency services begin with a comprehensive consultation and assessment of your and the partnerships specific circumstances. We take the time to understand the partnership structure, financial situation and if required, the partner’s personal finances, along with any ongoing disputes or challenges.
Development of a tailored Insolvency Strategy
Once you know the potential routes forward, we will work with you to create a personalised strategy for either the partners or partnership based on the data acquired during the consultation and taking into account your particular requirements and objectives. By gathering all relevant information, we can provide you with a clear picture of the available options, and the potential implications associated with each, so that you can stay in control and be confident that you are making an informed decision.
Negotiation and Mediation
It is possible that financial or trading difficulties could be improved through negotiation. In order to facilitate conversations between the partnership and its creditors with the aim of achieving a mutually agreeable but informal solution, in that instance our team could serve as intermediates with the aim of agreeing a solution with its creditors, which we could then implement to provide the partnership with the space needed to improve its trading activities.
Formal Insolvency Procedures
It is of course possible that relations with creditors, or available options, are at a point that informal negotiation is not an option, and that any solution will most likely require a formal insolvency process to enable the partnership to continue. Our Insolvency Practitioners have been appointed in various roles as Officeholders (the role is dependent on the chosen Insolvency process) in the past and we will support you throughout the whole procedure, ensuring that a fully compliant process is pursued with the objective of maximising the outcome for all parties.
Ongoing Support and Guidance
Our staff will always be on hand to provide help, direction and support throughout the chosen partnership insolvency process. We know that a partner’s personal finances are likely to be heavily impacted and as such are aware that you may experience emotional and personal financial strain. Therefore, our team will be on hand to respond to your inquiries, resolve your worries, and keep you updated on the status of your case.
Confidentiality and Professionalism
The highest levels of professionalism and confidentiality are upheld by Chamberlain & Co throughout the chosen procedure. We will ensure that we protect our customers’ privacy and confidentiality as we know how delicately partnership insolvency matters must be handled.
Chamberlain & Co is here to assist you, if you are involved with a partnership that may be insolvent, or at the risk of insolvency, and require professional guidance and assistance, please do not hesitate to contact us to arrange a consultation.
What is a Partnership Insolvency?
When a partnership has insufficient assets to pay its debts and other financial responsibilities as they fall due, then the partnership will be deemed as insolvent. This could lead to the initiation of insolvency proceedings.
Partnership Insolvency services
Initial evaluation
Letter of advice
Implementation of an informal solution
Testimonial
We approached Chamberlain & Co after a friend recommended their services. They quickly understood our situation and were able to act quickly to ensure that the Company was protected from legal action and provided a solution to save our business and preserve the employment of our loyal workforce.
We engaged with the Directors and developed a plan to save the business therefore protecting jobs. We assisted the directors in explaining the plan to key stakeholders and arranged for the business and assets of the company to be marketed and sold.
Contact Us
To ensure that as many options are available to your company as possible then it is crucial that you act quickly and seek advice from qualified Insolvency Practitioners. Please call on 0113 242 0808 and ask to speak with one of our Insolvency Practitioners or complete the form and we will contact you as soon as possible.
We provide free, no obligation, confidential consultations nationwide.
Please call not to see how we can help you and your business and whether Partnership Insolvency is right for you.
What are the advantages and disadvantages of Partnership Insolvency?
Advantages of partnership insolvency include:
- Managing the ongoing stress: If your partnership is in financial difficulty, then this will have been a source of stress for some time. By engaging an experienced Insolvency Practitioner to review the situation, outline options and implement a solution, this should provide you with context and informed advice which we hope will enable you to understand your options and keep your fears in check!
- Create space for new growth: If your partnership is in financial difficulty, then you have likely not had the resources or capacity to take advantage of new opportunities. Part of the benefit of an informed solution will be the management of legacy debt and thereafter the time and space to pursue new opportunities that you may not have previously been able to deal with.
Disadvantages of partnership insolvency include:
- Partners in an unlimited partnership are personally responsible for the debts of the partnership, if therefore the partnership assets are not sufficient to discharge its liabilities, then the partners may have to enter personal insolvency arrangements such as an Individual Voluntary Arrangement or Bankruptcy to fund that deficiency.
- In some industries, you may face issues with your regulator if you are a partner in a partnership that enters into an insolvency process.
- An insolvent partnership may have a detrimental influence on the partners’ creditworthiness and reputation, making it more difficult for them to get future finance or business prospects.
Partnership Insolvency FAQ's
What is the insolvency of a partnership?
When a partnership is unable to pay its liabilities as they fall due, it is insolvent. It also occurs when the partnership’s current liabilities exceed its available assets. In the absence of any agreed informal resolution and work out plan with creditors, it necessitates the need to engage with an Insolvency Practitioner. They will then identify, deal with and resolve the partnership’s financial issues, along with any associated financial issues faced by the partner’s that have occurred from the failure of the partnership.
What is a limited liability partnership or LLP?
A limited liability partnership, or LLP, is a common legal business structure for partnerships, which lies somewhere between a limited company and a ‘traditional’ partnership, this article provides an overview of this legal structure. The main point to note is that the partners in an LLP are not exposed to unlimited personal financial loss whereas they are in an unlimited traditional partnership, hence LLP’s becoming by far the most common legal structure for a partnership in the UK.
Can you wind up your own partnership?
If the partnership is in the form of an LLP, then all of the insolvency procedures available to a limited company are also available to an Limited Liability Partnership. This includes a solvent option such as a Members Voluntary Liquidation (MVL) where the partners want to close the business and extract their capital, as well as insolvent options such as a creditors voluntary liquidation, administration and creditors voluntary arrangement. If the partnership is an unlimited partnership then it could do its own voluntary arrangement (“a PVA”) , and / or the partners may need to enter into a personal insolvency procedure such as a bankruptcy or individual voluntary arrangement, if the partnership is unable to deal with its liabilities on its own.
What happens when a partnership owes you money?
If a partnership is not in an insolvency procedure, and you are unable to extract payment, then you will need to take appropriate enforcement action, the most common starting points are either a County Court Judgement (“CCJ”), a Statutory Demand or an application for a Winding Up petition depending on the quantum and certainty of the debt due. The CCJ is typically used for smaller amounts and the winding up petition for larger amounts.
If a partnership that owes you money is in an insolvency procedure then you will need to submit a proof of debt claim form to the appointed Insolvency Practitioner. You will receive periodic reports detailing the situation, progress made and the prospects of whether and how much money you are likely to receive.
Does the Insolvency Act apply to partnerships?
Yes, both unlimited partnerships and Limited Liability Partnerships (“LLP’s”) are covered by the Insolvency Act and related legislation.
What happens when a partnership cannot pay its debts?
When a partnership cannot pay its debts, the partners need to take professional advice from an Insolvency Practitioner to protect their own position and ensure they are not engaging in wrongful trading, which would otherwise lead to personal liability. The Insolvency Practitioner will then review the partnership’s financial position, along with the partners if appropriate and advise on the next steps to optimise the outcome for all stakeholders. This may involve the partnership going through an insolvency procedure, which may involve a range of options such voluntary agreements, administration, or liquidation. The particular course of action will depend on the situation.
What happens if a partnership ceases to trade or becomes insolvent?
When a partnership is unable to pay it’s liabilities as they fall due, and a decision is taken to place it into insolvency, it will have to appoint an Insolvency Practitioner and enter into an insolvency process which will have the ultimate aim of maximising the returns to creditors that were owed money prior to the insolvency of the partnership. If the partners do not take the appropriate action, it is likely that a creditor(s) will.
What is the difference between insolvency of an individual and a partnership?
If it is an unlimited partnership then it is likely that the partners themselves will either decide, or be forced, to have to enter into a personal insolvency procedure, which will typically be an Individual Voluntary Arrangement (IVA), or bankruptcy. If the partnership is structured as an LLP, then the partner’s liability is limited to the capital they had in the partnership at the time it entered into an insolvent process and the partners are much less likely to need to enter into a personal insolvency process. The insolvency processes available to a LLP are the same as those available to a limited company.
Can a partnership be dissolved without being liquidated?
Yes, if it is an unlimited partnership, then it can be terminated without having to go through a liquidation procedure. The phrase “dissolution” describes the official end of a partnership’s existence. A partnership may be dissolved under specific conditions by consent of the partners or as a result of other events outlined in the partnership agreement. The management of the partnership’s affairs after dissolution, including the payment of debts and division of assets, can be done in accordance with the terms of the partnership agreement or any relevant legislation.
If it is a Limited Liability Partnership, then depending on the quantum of assets held by the partnership, it will either need to go through a solvent liquidation, which is known as a Members’ Voluntary Liquidation (MVL) or struck off from Companies House.
Can a partner dissolve the partnership at anytime?
This should be covered in the partnership agreement and should detail whether or not a partner has the right to terminate a partnership unilaterally. A partner may have the right to dissolve a partnership at any time in some circumstances, but in other situations, the partnership agreement may specify a specific procedure or prerequisites that must be satisfied before dissolution can take place. To fully comprehend the exact rights and responsibilities involved in a partnership dissolution, it is crucial to consult the partnership agreement and obtain legal advice.
How long does it take to dissolve a partnership?
The complexity of the partnership’s business, the existence of any pending legal problems, and the effectiveness of the parties participating in the procedure can all affect how long the partnership dissolution process takes. Although it might be difficult to give a specific schedule, partnership dissolution often entails a number of processes, including informing the appropriate parties, resolving debts, dividing assets, and meeting legal requirements. The procedure could take a few weeks to several months, or even longer in certain situations.
How do I close a partnership with HMRC?
It’s crucial to follow the correct steps and abide by the relevant tax laws in order to finalise a dissolution with HMRC (Her Majesty’s Revenue and Customs). In general, you would need to notify HMRC of the partnership’s dissolution by completing the required forms and giving pertinent information, such as final accounts and tax returns. The exact processes may vary based on the circumstances. When ending a relationship with HMRC, it is recommended to get expert guidance from an accountant or tax specialist to guarantee compliance with the necessary duties.
