INDIVIDUAL VOLUNTARY ARRANGEMENTS
A family business where father and son had traded in partnership for a number of years in a joinery business.
The business had encountered a downturn in trading over a considerable period resulting in a host of trade liabilities together with the imminent threat of recovery action from HMRC.
At the same time, the father was seeking to dispose of his private dwelling and other assets to family members to try to alleviate the position.
Poppleton & Appleby were contacted by the partnership accountants and attended a meeting at their offices with the partners.
- The partnership was indeed insolvent. However, without limited liability status, the partners were held to be individually liable on a joint basis for all liabilities. Hence, they faced the real prospect of bankruptcy.
- This would bring “personal” assets into the picture. One partner had significant equitable assets while the other had negative equity.
- With the prospect of bankruptcy, Poppleton & Appleby advised that any sale of private assets particularly to family members must be undertaken with caution so as not to bring in the question of transactions at undervalue which would be vigorously pursued by a Trustee in bankruptcy.
- Each partner’s unsecured liabilities were limited to the trading liabilities of the partnership.
- Poppleton & Appleby advised concurrent Individual Voluntary Arrangements.
- The partners formed a limited company to continue to trade.
- A professional valuation of the trading assets was undertaken, and the IVAs were to be adequately compensated.
- Poppleton & Appleby assisted in the preparation of proposals for IVAs supported by cash flow forecasts and income and expenditure assessments prepared by the accountants.
- At the meeting to consider the proposals, creditors failed to approve the IVAs.
- Poppleton & Appleby engaged in extensive dialogue with HMRC whose voting power was critical to the approval of the proposal, to agree a series of modifications.
- At an adjourned meeting of creditors, the IVAs were approved with modifications agreed by the partners individually.
- The limited company has continued to trade giving suppliers the opportunity of further business.
- Contributions have been maintained into the IVAs.
- The afore-mentioned sale of “personal” assets was undertaken with the support of professional valuations and where equitable proceeds have been paid into the IVAs for the benefit of all creditors.
- The Supervisor has been able to maintain distributions to creditors, and the IVAs continue satisfactorily.