Sole Trader Partnership & 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.

Our 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.

The solutions we may recommend to a partnership experiencing financial difficulty include:

Operational or financial restructuring

We work alongside the partners and stakeholders to 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)

We can assist with preparing a proposal to creditors based upon payments from future profits. Acceptance of the proposal by creditors will remove immediate financial pressures and allow 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 Individual Voluntary Arrangements to run concurrently with the PVA.

Partnership Administration

If the partnership requires protection from creditors whilst it is undertaking restructuring, refinancing or is considering a sale, a Partnership Administration may be appropriate.

Partnership Liquidation

A partnership can only be placed into liquidation by an order of the Court on the petition of either a creditor or a partner. A partnership cannot be wound up voluntarily. Our licensed insolvency practitioners can act as liquidator.

If you are a sole trader, you are personally liable for the debts of the business and you do not have the benefit of the ‘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. We can carry out a review of your business and advise on the most practical and workable solution available.

Solutions we regularly advise sole traders on include:

• Informal compromise with creditors – our Corporate Restructuring team can assist with contacting key or significant creditors with a view to negotiating extended or reduced repayment terms
• Individual Voluntary Arrangement (IVA) – if your business can survive its current financial difficulties and return to profitability, we 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 cannot survive, we can advise on the consequences of bankruptcy and the impact it may have, not just for the sole trader, but also for the business

Our licensed insolvency practitioners have assisted with the financial restructuring of many financially distressed businesses struggling with cash flow problems or facing threats from creditors.