Administration 2018-01-05T09:19:43+00:00


Partnership Administration Order

A Partnership Administration Order (‘PAO’) is a formal insolvency procedure similar to that of a company Administration. It protects a partnership from its creditors while an Administrator, a licensed Insolvency Practitioner, reviews and considers the partnership’s financial position to decide whether it can be rescued. Administration is suitable for a partnership that is struggling financially but has a potentially viable business.

A PAO could be a suitable option if your partnership is unable to pay its debts. A partnership is deemed unable to pay its debts where it has insufficient assets to pay its debts, known as the “balance sheet test”, or is unable to pay its debts when they fall due, known as the “cash-flow test”. The balance sheet test will be satisfied where a partnership has insufficient assets to be able to meet all of its liabilities, including prospective and contingent liabilities, as and when they eventually fall due.

An Administrator must perform his functions with the objective of achieving one or more of the statutory purposes of the Administration. These are the survival of the whole or any part of the undertaking of the partnership as a going concern, or the approval of a Partnership Voluntary Arrangement (“PVA”), or achieving a more advantageous realisation of the partnership property than would be likely if the partnership were to be wound up.

An application for a PAO can be made to the court by the members of the partnership, one or more of its creditors or the Supervisor of a PVA. The court is likely to make a PAO if it is satisfied that the partnership is unable to pay its debts and it considers that the making of the order would be likely to achieve one of the statutory purposes. An Administrator may also be appointed out of Court by the members of the partnership. Under the court procedure an Administrator will only be appointed if the court accepts that the partnership is actually unable to pay its debts, unlike in the case of corporate insolvency where the court only needs to be satisfied that the company is likely to become unable to pay its debts.

If your partnership is being threatened by a creditor, such as a landlord, HMRC or your bank, or is being threatened with legal action such as a winding-up petition, a PAO could prevent the creditor from taking any further action against you.

The process for appointing an Administrator in relation to an LLP is the same as that for a company. An administrator may be appointed by the court on the application of the LLP itself or one or more of its creditors. An Administrator may be appointed out of court by the LLP itself or by a creditor who holds a qualifying floating charge.

If your partnership is experiencing financial difficulties, we can work with you to identify the most appropriate solution. We have helped partnerships of all sizes across many different sectors. We understand that being pursued for unpaid debts is a hugely stressful time. If you believe your business is potentially viable but is struggling financially, Administration may be the most appropriate solution. Contact us today on 0800 061 4002 for information on a Partnership Administration.



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