Two or more persons may be in partnership to run a business for profit. Examples of common partnership businesses include professional firms, family and husband and wife businesses.
Such businesses may, like all businesses, underperform and face financial difficulties.
Since, in law, partners are jointly and severally liable for all the debts of a partnership, the individual partners may also face personal financial difficulties when their partnership underperforms.
As a general rule, partnership insolvency procedures only affect the financial affairs of the partnership and not the individual partners.
However, separate insolvency procedures may be required for the individual partners as well as an insolvency procedure for the partnership.
For the purposes of insolvency law, a partnership is treated as if it were a limited company. Therefore, the types of insolvency procedure that could be applied to a partnership business are :-
- Partnership Administration – the same insolvency rules that govern the Administration of a limited company also apply to a partnership Administration.
- Partnership Liquidation – a Liquidation of a partnership is governed by the same insolvency rules as those of the Liquidation of a limited company.
- Partnership Voluntary Arrangement – this is run in much the same way as a limited company Voluntary Arrangement.