Module 17 - Partnerships

Question 1

Define a Partnership

Answer 1

Relationship which subsists between persons carrying on business with a view to profit

Question 2

3 Key facts of Partnership

Answer 2

Contractual relationship between the parties;
Does not have to be in writing;
Can be a partnership at will

Question 3

Key facts of a Limited Liability Partnership

Answer 3

At least 2 members;
Deemed to be a separate legal entity;
Not covered by traditional partnership law;
Protects partners from personal liability;
Will fall under remit of s11 CDDA 1986

Question 4

3 Grounds for a Creditor to Wind up a Partnership

Answer 4

Ceases to carry on business;
Unable to pay its debts;
Just and equitable to do so

Question 5

What options are open to a Creditor versus a Partnership?

Answer 5

Wind up Partnership only;
Wind up Partnership AND petition against insolvent members;
Petition against one or more members but NOT wind up the Partnership;
Petition against one or more insolvent members but NOT wind up Partnership and NOT against any other members

Question 6

What options are available when advising debtors and partners?

Answer 6

Bankruptcy for individual members;
Interlocking IVAs for individual members;
Winding up Partnership;
Administration of Partnership;
Partnership Voluntary Arrangement

Question 7

On what grounds can a petition be issued to wind up a Partnership?

Answer 7

Partnership is dissolved;
Partnership is unable to pay its debts;
Court thinks it is just and equitable to wind up

Question 8

Advantages of a PVA

Answer 8

Trade can continue and partners keep control;
Lower risk of personal liability than winding-up;
Better return to creditors reducing liability to members;
Costs should be lower than winding up;
Partner assets generally excluded;
Moratorium available

Question 9

Disadvantages of PVA

Answer 9

Partners must agree 100% to do it and 75% must agree the actual proposal;
PVA does not bind personal debts of members;
PVA does not get rid of personal liability so members may need own debt solution to avoid losing their own assets

Question 10

PVA with Interlocking IVAS of Members - advantages

Answer 10

Moratorium and IO can be used to get protection;
All creditors will be bound;
Proposals can all be flexible and chose which assets are offered up;
PVA can be made more attractive by partners deferring their claims

Question 11

PVA with Interlocking IVAS of Members - disadvantages

Answer 11

Drafting is v complex - all partners need to agree to IVA and PVA;
May not be suitable with large number of partners;
Fees to draft proposal could be high;
If one IVA fails, they all fail

Question 12

Personal solutions to Members of the Partnership after they have to cover shortfall? (8)

Answer 12

Self help;
Informal arrangement;
Remortgage;
Consolidation Loan;
Debt Management Plan;
bankruptcy;
IVA;
DRO

Question 13

3 different Officeholder Positions?

Answer 13

Liquidator of Partnership AND Trustee of Bankrupt Partners;
Liquidator of Partnership but no Bankruptcy petitions;
Trustee of Bankruptcy but Partnership not wound up

Question 14

Criteria for a PVA (7)

Answer 14

Turnover not more than £10.2 million;
Must not hold assets valued over £5.1 million;
No more than 50 employees;
Must not be in Administration;
Must not be being wound up as insolvent company;
No Voluntary Arrangement in effect in relation to the insolvent partnership;
Not have a moratorium in force for the insolvent partnership at any time in the past 12 months

Question 15

Who can Propose a PVA?

Answer 15

Members of Partnership;
Administrator of Partnership;
Liquidator of Partnership;
Trustee of Partnership

Question 16

PVA Procedure?

Answer 16

Proposal;
Accompanied by S o A;
Nominees Report

Question 17

Voting Ratios for PVA?

Answer 17

75% of Creditors;
50% or more of Members

Question 18

3 x Purposes of an Administration Order over a Partnership?

Answer 18

Rescue as a going concern;
Result - better than being wound up;
Realise property to make distribution or one or more preferential or secured creditors

Question 19

Who can make a Partnership Administration Order?

Answer 19

Members of insolvent Partnerhsip;
One or more creditors of Partnership;
Liquidator of a Partnership

Question 20

Who can make out of Court route available?

Answer 20

Members;
Holder of qualifying agricultural floating charge

Question 21

Effect of Partnership Administration Order

Answer 21

Winding up Petition dismissed;
Receiver or Agricultural Receiver must vacate office

Question 22

Powers of Administrator?

Answer 22

Can’t remove or expel a partner;
Can prevent a person being involved in management of business

Question 23

Moratorium during a PVA

Answer 23

Takes effect when partnership in Administration;
Administrator required to give notice;
Actions cannot be taken without consent of Administrator or Court consent;

Question 24

What can’t you do under a Moratorium with a Partnership Administration Order?

Answer 24

You can’t enforce security;
Commence legal proceedings;
Repossess goods under hire purchase;
Landlord cannot exercise right to forfeit or distrain