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Partnerships & Sole Trader Insolvency

Individuals who run a business, either as a sole trader or as a partner in a partnership, are personally liable for the debts arising from their business.

Restructuring & Insolvency advice for Partnerships

Should a partnership or partner experience any financial difficulty, Mercer & Hole’s Restructuring & Insolvency team can offer advice on the options available and assist with implementing the most appropriate solution.

In a partnership, partners are personally liable for the debts of the business, although partners in a limited partnership (not to be confused with a limited liability partnership) may have a limit on their liability set out in the Partnership Deed.

Mercer & Hole can advise on the following solutions available to a partnership experiencing financial difficulty:

  • Operational or financial restructuring – working alongside the partners and other stakeholders, Mercer & Hole can deliver and implement a restructuring solution which will get the business back on track and help improve cash flow, profit and the value of the business.
  • Partnership Voluntary Arrangement (PVA) – Mercer & Hole can assist with preparing a proposal to creditors based upon payments from future profits. Acceptance of the proposal by creditors will remove the immediate financial pressures allowing the business to continue to trade. As with a Company Voluntary Arrangement, a ‘small’ and ‘eligible’ partnership can take steps to obtain a moratorium. If personal assets are at risk during this time, it may be appropriate for partners to enter into separate IVAs to run concurrently with the PVA.
  • Partnership Administration – if the partnership requires protection from creditors whilst it is undertaking its restructuring, refinancing or considering a sale, a Partnership Administration may be appropriate.
    • Mercer & Hole’s Licensed Insolvency Practitioners can act as administrators.
    • Once in administration, no legal proceedings can be commenced or continued against the partnership except with the permission of the administrator or consent of the Court.
  • Partnership Liquidation – A partnership can only be placed into liquidation by an order of the Court on the petition of either a creditor or partner and can not be wound up voluntarily. Mercer & Hole’s Licensed Insolvency Practitioners can act as liquidator.

Restructuring & Insolvency advice for Sole Traders

A sole trader is personally liable for the debts of the business and does not have the benefit of ‘limited liability’ protection available to businesses incorporated under the Companies Act or the Limited Liability Partnerships Act.

Should a sole trader experience financial difficulty, advice should be sought as soon as possible. Mercer & Hole can carry out a review of the business and advise on the most practicable and workable solution available.

Solutions we regularly advise sole traders on include:

  • Informal compromise with creditors – Mercer & Hole’s Restructuring & Insolvency team can assist with contacting key or significant creditors with a view to negotiating extended or reduced repayment terms.
  • Individual Voluntary Arrangement (IVA) - if the business can survive its current financial difficulties and return to profitability, Mercer & Hole can assist with drafting a proposal to creditors for an IVA. The proposal must offer a greater repayment to creditors than that which would be available if the business ceased trading.
  • Bankruptcy - in the unfortunate event that the business can not survive, Mercer & Hole can advise on the consequences of bankruptcy and the impact it may have, not just for the sole trader, but also for the business.

At Mercer & Hole our Licensed Insolvency Practitioner Partners and Directors have assisted with the financial restructuring of many financially distressed businesses struggling with cash flow problems or facing threats from creditors.

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