Interlocking IVAs

For smaller partnerships, less than 3 or 4 partners, proposing inter-locking IVA’s can offer a simpler and cheaper alternative.

PVAs and IVAs

The two procedures can be used simultaneously where there are a number of partners whose financial circumstance differ i.e. some do not have personal debts, some do. Also the partnership itself is under pressure from creditors.

All the partners are vulnerable to action from partnership creditors and the partners with personal debts which have become problematic and unaffordable will protection from personal creditors.

Example

A law practice with 10 partners has solvency problems and needs to consider a PVA in relation to partnership debts. However, there are four partners who in addition to the partnership debts, have personal debts which exceeds the value of their personal assets. These partners therefore need to put forward a deal to their personal creditors which will also relieve pressure on the partnership as these partners’ drawings requirements were unsustainable.

The PVA allows the partnership to repay as much of its debt over a defined period of time. The PVA protects the partnership from action by either partnership or the partner’s personal creditors. However, the partner with problem debt will potentially face action against their assets and so for those partners affected it may be necessary to consider either standalone or inter-locking IVA’s alongside the PVA. 

Inter-locking IVA’s for smaller partnerships

For smaller partnerships, less than 3 or 4 partners, proposing inter-locking IVA’s can offer a simpler and cheaper alternative. The Inter-locking proposals could provide that the partnership continues to trade and pays into the inter-locking arrangements a monthly sum to settle all debt including partnership and private debt.

Creditors would expect full disclosure of the personal assets and debts of all partners and partners are likely to have to agree to look at refinancing properties to introduce sums in lieu of equity or possibly selling surplus assets to introduce sums to go into the pot for all creditors.

For more details about IVA’s please see IVA’s for self-employed.

The Business Debt Advisor is part of The Debt Advisor Ltd which is regulated by The Financial Conduct Authority. This means we are able to offer advice and deliver both formal and informal solutions. All debt solutions need to be carefully considered and it’s vital that partners take independent advice.