Advice and guidance on Partnership Voluntary Arrangements

How does a PVA work?A partnership voluntary arrangement, or PVA, is an agreement to repay a share of business debts to unsecured creditors.

It is modelled after the Company Voluntary Arrangement (CVA), which is used by limited companies, and can be a beneficial instrument to foster profitable collaborations.

An official payment arrangement like this one requires the commitment of all partners, and they might each need their own Individual Voluntary Arrangements (IVAs) in addition to the PVA.

IVAs that are concurrent or interlocking protect partners from personal insolvency while securing the company.

How does a PVA work?

A PVA’s works by giving creditors of a partnership a better return than would be attainable if the partnership were wound up while also giving the company an opportunity to be restructured.

With the help of professionals, the partners typically come up with a new repayment scheme that is based on paying back a portion of the debt, such as 40p for every £1. The partnership’s decision to reject the offer is explained, along with the justifications for why its creditors ought to accept it.

The business will make a single payment each month rather than paying several creditors if 75% (by value) or more of creditors concur. The designated insolvency practitioner (IP) distributes the funds to creditors.

Any outstanding debt at the conclusion of the PVA period is written off, allowing the company to continue operating free of unmanageable debt. PVAs typically last three to five years and are binding on both the partners and the creditors of the partnership.

A PVA can only be formally started by an insolvency practitioner, who is then in charge of making sure the partners abide by the terms of the agreement.

The following are a PVA’s main advantages for partners and creditors:

  • Stop making existing payments
  • Reestablish the terms and circumstances for paying off obligations
  • There are no longer any interest or repayment fees for loans.
  • Instead of making payments to several creditors, make arrangements for a single periodic installment.
  • Give the partners some breathing room so they can reorganise and reorganise their company.
  • Stop partners being pressured and chased by creditors for payments.
  • Identify a solution to avoid bankruptcy and move towards long-term stability.
  • Boost a company’s long-term viability
  • Give creditors a way to recover all of their obligations rather than putting assets up for sale to try to recover losses during liquidation procedures
  • Set a specific timeline and action plan for the partnership’s recovery.

When is a partnership voluntary agreement (PVA) used?

Partners who are experiencing financial hardship who are presently unable to pay their bills or may soon be unable to do so use a PVA.

For a PVA to be the right course of action for business recovery, partnerships may be experiencing financial problems for a variety of reasons, thus it’s always crucial to get in touch with a licenced insolvency practitioner.

Cash flow issues are a common difficulty for partnerships entering a PVA because of trading or economic slump deficits. A partnership can have lost a significant client, funding, or investment for their company.

By relieving the burden on the partnership’s repayments, a PVA can be used to essentially buy the partnership time. This prevents the partnership from needing to be liquidated and enables it to restructure, attract new clients, or secure capital.

Importantly, a PVA must only be utilised when there is a prospect for long-term trade recovery and profitability. A PVA cannot be put into effect unless the partnership is viable. If the partnership merely falls back into financial difficulty once the contract has finished, it won’t work.

How does a PVA compare to other arrangements?

In many unfavourable financial circumstances, a PVA may be the best line of action, but it’s always vital to look at other bankruptcy remedies that partners might also take.

The following are some more choices for the partnership:

  • Individual Voluntary Arrangement (IVA)
  • Voluntary Liquidation
  • Compulsory Liquidation

Since a PVA is established between creditors and all partners in a partnership, it is sometimes the initial course of action for failing partnerships. Individual business partners can be compelled to enter into an Individual Voluntary Arrangement with their creditors if a PVA cannot be reached.

In contrast to a PVA, which only considers a company’s assets and liabilities, partners who sign into an IVA take on personal responsibility for the company’s debts. A partnership may occasionally involve a combination of personal and business liabilities. In this case, partners might need to sign both an IVA and a PVA to settle their debts.

It may be decided that a partnership needs to be liquidated if participants and creditors concur that a business is no longer sustainable. Even if voluntary liquidation is never the best option for partners or creditors, it is still a better choice than forced liquidation.

A firm may choose to wind down voluntarily through voluntary liquidation. When possible, partners will be able to reach agreements that will allow them to avoid personal liability for debts and sell off assets to pay off debts.

In the worst-case scenario, creditors can force compulsory liquidation if all attempts at discussion between partners and creditors are unsuccessful. To do this, the creditors must persuade the court that they have exhausted all other options for recovering the money owed to them. The partners may be held personally accountable for any unpaid obligations, and the partnership may be forced to liquidate and sell its assets to pay its creditors.

What will happen to a business?

The partners are required to fulfil their obligations under a Partnership Voluntary Arrangement once it has been finalised by the partners, creditors, and an insolvency practitioner.

Partners maintain full operational and financial control over their business. The company is still run by its current partners, but it’s likely that they will need to restructure it in order to comply with the conditions of the agreement.

Except if all debts have been fully discharged, partners are nonetheless responsible for all debts and must adhere to their new repayment obligations. In order to turn a profit and pay off its debts, the company must trade. To adhere to their revised repayment schedules, partners will need to locate new clients, make new investments, or sell off assets.

The insolvency practitioner will need to examine the issue and take new bankruptcy proceedings if a partnership doesn’t follow the requirements of a PVA. In the worst case, creditors may be able to compel a partnership into bankruptcy or liquidation in order to recover money owing to them.

How long does a PVA last?

A PVA will last up-to 5 year, each partnership determines their own PVA’s own terms. A PVA’s duration is determined by the agreement reached between the partners and creditors.

It’s unlikely that a PVA will survive for shorter than 12 months because restructuring and reorganising a partnership can take time to bring about profitability again. This is dependent on the business’s survival and long-term strategy. PVAs may also be in effect for a period of time of up to five years.

How can I set a PVA in motion?

Since a PVA is a voluntary arrangement, the partners must initiate the arrangement. The first thing to do if your partnership is having financial trouble is to get independent insolvency advice from a qualified professional, like Irwin Insolvency.

If a PVA is the right line of action for your partnership, we can then offer the relevant advice. The insolvency practitioner then draughts an agreement if a PVA is chosen. Before the insolvency practitioner delivers the draught for debate, all creditors are called to a meeting.

The PVA is placed to a vote once the agreement’s specifics have been decided. It must receive the support of 75% of the creditors in order to pass. Back to the negotiating table if the vote doesn’t pass.

A PVA is likely to have the support of creditors. Through a PVA, they have a better chance of recovering the money they are owed than they would if a partnership were forced into involuntary liquidation. They can continue to conduct business together in the future (assuming they can maintain good relations) if a PVA is successful and creditors are able to recover the loans from the partnership.

Benefits of a Partnership Voluntary Arrangement

  • Partners maintain management of their company and carry on trading.
  • To address the partnership’s debts without being under creditor pressure, a breathing room is created.
  • Creditors get a better return than they would if the partnership was dissolved.
  • enables refinancing or restructuring as necessary to address short-term cash flow issues.
  • The debt’s interest and fees are cancelled.

Gaining access to working capital via a PVA

The lack of capital that led to the partnership’s collapse might have been caused by transient events, making the underlying firm possibly long-term viable. Because of this, the partners might be able to trade their way out of the predicament by progressively increasing cash flow by a few adjustments to operating procedures or organisational structure.

Otherwise, the IP may decide that this is enough to run the business until trade recovers if the company possesses one or more significant assets that might be sold relatively rapidly to create a lump sum of working capital.

Frequently asked questions

What is a partnership voluntary arrangement?

A Partnership Voluntary Arrangement (PVA) is a legal process in which a partnership facing financial difficulties enters into a formal agreement with its creditors to restructure its debts and repay them over a specified period of time. It is a mechanism designed to help partnerships avoid insolvency and continue their operations while addressing their financial challenges.


In conclusion, a Partnership Voluntary Arrangement (PVA) provides a viable and flexible option for struggling partnerships to overcome financial difficulties and regain stability. By allowing partners to negotiate a mutually agreeable repayment plan with creditors, the PVA offers a structured and orderly process for addressing debts while preserving the ongoing operations of the partnership.

This arrangement enables partners to take control of their financial situation, avoid insolvency, and work towards a sustainable future. With careful planning, open communication, and a commitment to fulfilling the terms of the arrangement, a partnership can emerge stronger, more resilient, and ready to thrive in the face of economic challenges.

The Partnership Voluntary Arrangement is a valuable tool for partnership businesses seeking to navigate financial distress and pursue a path of recovery.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.