Partnerships in trouble
Partnerships have a completely different dynamic to limited liability companies, and need to be advised by professionals with practical experience
We have specialist expertise in advising in respect of both conventional partnerships and LLPs in financial difficulty. These have included firms of solicitors, accountants, doctors, dentists, and farming partnerships.
Limited Liability Partnerships (LLPs)
LLPs do not provide the complete protection from personal liability that members of most LLPs seem to think they enjoy.
If an LLP is in financial difficulty and is facing liquidation or administration, then organising the business’ affairs and timing the formal insolvency can be critical to avoiding personal liability.
Unlike a LLP or limited company, a conventional partnership does not have a legal existence separate from the partners.
The insolvency of conventional partnerships is notoriously complex, but ultimately the partners are personally liable for the partnership debts.
If formal insolvency is unavoidable, then the multiplicity of insolvency processes (e.g. liquidation of the partnership and bankruptcies of the individual partners) usually mean that assets are dissipated in costs, expenses, and government taxes such that the distribution to creditors can be pitiful.
This means opportunities exist for the partnership and partners to propose voluntary arrangements with their creditors, although these are complex to construct and negotiate.
Additionally, professional partnerships need to adhere to the relevant professional rules that apply.
We have dealt with a large number of firms of solicitors in financial difficulty and have particular expertise of dealing with firms that have personal injury teams, where we are able to use our industry contacts to maximise the recovery of work in progress.
Many long established professional partnerships have been the subject of pension shortfall claims. We are able to assist in negotiating settlements of section 75 debt where the shortfall is unaffordable.
For more information or to start a conversation on how we can help you please contact Andrew Frake, Associate, Dispute Resolution.