You
are in: Rescue
& Recovery > Partnerships
Partnerships
You are a Partner of a
partnership which is in financial difficulty.
You and your fellow partners may also be in financial difficulties in
your personal capacities.
To make matters
worse, you need to think very carefully and clearly as the legislation affecting
insolvent (and potentially insolvent) partnerships and the individual partners
is vast and extremely complex. As a result, insolvency is a very specialist
area.
Additional
complexities of partnerships
Although there
are often tax and commercial advantages of partnerships, dealing with insolvent
partnerships, unfortunately, can be extraordinarily complex.
It is important
to understand the reason for the additional complexities - please click on
The reasons for
the additional complexities of partnership are as follows:
The reason for
this is that the liabilities between partnership and individual partners are
interlinked. This makes rescues, restructuring and insolvency far
more complicated than corporate or personal insolvency when there is only one
legal entity to deal with. As
an opinion, there have to be very, very powerful commercial benefits of using
partnerships as business vehicles (as opposed to limited companies) to overcome
the considerable disadvantages of partnership insolvency.
Decision
Making Strategy
You need to
consider the key areas detailed below.
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Establish
if the partnership is insolvent - and if the individual partners are
insolvent. (See Insolvency
Tests)
It is important to
establish if the partnership is insolvent
- and the financial positions of the partners as it affects :
1. The options available.
2. The required conduct of the
directors.
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If
the partnership is insolvent and if the individual partners are insolvent -
what are your objectives?
If the
partnership is insolvent - it is important to lay down specific objectives
to ensure that the correct option is taken. Therefore, during the planning
process, you need to think - what should you (as a partner) be trying to
achieve?
We can give help and suggestions as to what your objectives should be.
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Having
established your objectives - what are the available options for both the
partners and the individual partners?
Having established your objectives - you need to examine what
your options are, given the circumstances.
To find out these options - we need to look at the commercial and legal
options available to the partnership.
Each option will have certain advantages and disadvantages.
Therefore, it is common in an insolvency crisis that the chosen
course of action will be a compromise
- so
invariably it will be the best option rather than a perfect option.
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Options
Available Partners
Non Insolvency Options
Partnership Administration
Partnership Voluntary Arrangement
Simultaneous IVA’s
Winding Up Partnership (with no insolvency of individual partners)
Bankruptcy of Partners
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Now
you choose the best available options to maximise your objectives.
When you have
established :
2.
The objectives of the partnership and the individual partners, and
3. The options available to
the partnership and the individual partners,
You then choose the option that maximises your (or the partnership's) objectives
- having fully understood the big picture. |
