Partnership Liquidation
When a partnership is unable to pay its debts and creditors believe that they have exhausted all avenues to recover monies owed, they can petition to the Court for the partnership to be wound up as an unregistered company. The process is virtually identical to compulsory company liquidation and is the most serious action a creditor can take against a partnership.
In the majority of cases, a creditor will serve a Statutory Demand on the debtor partnership using a Process Server. If the indebted partnership fails to pay the amount stipulated in the Statutory Demand within 21 days following service, and the debt is not disputed on substantial grounds, the creditor can then petition to the court for the partnership to be wound up.
As each member of the partnership is jointly and severally liable for the partnership debts, a creditor can also petition for the bankruptcy of one or more of the members of the partnership, or if the partnership has corporate members, wind them up.
A winding up petition can also be presented by a Liquidator or Administrator of a corporate member of the partnership, a trustee in bankruptcy of a member of the partnership, a Supervisor of a Partnership Voluntary Arrangement (‘PVA’), a Supervisor of a corporate member, or one or more of the members of the partnership. The Insolvency Act 1986, as modified by the Insolvent Partnerships Order 1994, expressly provides that no insolvent partnership can be wound up voluntarily.
When a partnership is wound up, its assets will be realised to pay its liabilities. Any surplus assets, or in the alternative, any shortfall of the partnership debts, will transfer to the personal estates of each individual partner. Therefore, a creditor should consider what assets and liabilities each partner and the partnership itself has before initiating proceedings.
If a winding up order is made against a partnership, the Official Receiver will be appointed to deal with the partnership’s affairs as Liquidator. In the appropriate circumstances, a Partnership Administration Order (‘PAO’) or Partnership Voluntary Arrangement (‘PVA’) may be a better solution than Liquidation.
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. Contact us today on 0800 061 4002 for further information on a partnership liquidation.