Partnership Administration

Partnership Administration

A Partnership Administration Order is similar in some ways to Administration for a limited company. It is a rescue vehicle often used by larger partnerships such as accountants, solicitors and architects. Many of these are now trading as limited liability companies, but many partnerships do still exist. For those running out of cash it is certainly something to consider.
All of the partners must be solvent. Effectively the partnership administration is to protect the partnership whilst a restructuring, refinancing or sale is considered.
The process is begun by preparing a statement of affairs which will show the true position of the partnership. The partners can then apply to court, and we would assist in this process as it can be daunting. An administrator will be nominated and again we will assist with this as that person needs to be suitably licensed for this type of work. It is usual for an interim order to be granted to prevent creditors taking any action against the partnership whilst the court consider matters.

At the hearing the court considers the application and whether it should allow the court to grant powers to the administrator to run the partnership affairs. The court may then grant the order which gives full protection to the partnership – a full moratorium providing all conditions are met and the rules observed.
The admin order is granted only when the one of three options is being pursued.
1. The proposal of a partnership voluntary arrangement
2. Survival of all or part of the business as a going concern
3. A more orderly realisation of assets than may happen in winding up (In other words avoidance of the meltdown of assets inevitable in liquidation.
The IP will over the next three months put his plans into operation for achieving one or more of the above three options
The benefits of Administration are
1. Protection of the partnership business from creditors

2. The IP has breathing space in which to develop and put in place the rescue plan.
3. It stops on creditor from exerting more influence on matters than others.
4. It generally leads to a better return for all creditors.
5. In the event that one or more partners is also suffering financially, it prevents an attack on partnership assets by a rapacious creditor.
The risks or downsides are:
1. It is necessarily costly, but maybe not as costly as the whole partnership failing.

2. The business world will know of the administration as all communications will record that fact.
3. There must be sufficient cash available for the partnership to trade through the administration process, however a good plan will factor this into the equation.

4. The individual partners may also depending on their personal financial situation, need to do simultaneous IVA’s

If you are in a Partnership that is struggling at present you should take urgent initial advice to see what can be done to ease your way through the financial difficulties you are in.