M3.7: Trading issues & PVAs

Question 1

What is the impact of an insolvency related clause in a contract?

Answer 1

Where an insolvency related term of the contract ceases to have effect, the supplier may terminate the contract if:

▪ Supervisor consents to termination

▪ Court grants permission (must be satisfied that continuation of the
supply would cause hardship to supplier)

▪ Any post appointment supply charges are not paid within 28 days of
being due

Question 2

Where an insolvency related term of the contract ceases to have effect, the supplier may terminate the supply if…?

Answer 2

Supplier gives notice to the Supervisor that supply will be terminated unless
supervisor personally guarantees post-appointment supply

And Supervisor does not provide guarantee within 14 days of request

Question 3

What is the position where there is a PVA with interlocking IVAs?

Answer 3

Creditors’ claims generally treated in the same manner as a winding
up

▪ Where there is a shortfall on the partnership assets creditors are
likely to expect the partners to contribute to this

The PVA does not stop a dissatisfied creditor for petitioning for the personal bankruptcy of one or more of the partners. Therefore:

▪ Common to protect against this with simultaneous IVA proposals

▪ These may include personal liabilities at the same time

▪ Or if the PVA will ultimately produce payment in full, may be used just as a
“holding mechanism”

Question 4

What is the priority of creditors’ claims in a PVA?

Answer 4

The general principle:

▪ Joint estate of the partnership must be applied in paying the joint debts and

▪ Separate estate of each member (partner) must be applied in paying each partner’s separate debts

▪ Individual partners are not responsible for the personal debts of the other partners

But are jointly and severally liable for any unpaid partnership debts

Where there is a shortfall to partnership creditors, the office holder for the partnership:
▪ Calculates the amount of the shortfall
▪ Proves for the total amount of the shortfall in each of the separate estate
▪ Proves on behalf of the partnership creditors (they do not prove themselves)

Question 5

Who can make a PVA proposal?

Answer 5

Proposal made by partners
▪ By unanimous agreement unless partnership agreement provides otherwise

If in administration or being wound up, only the office holder can propose

Question 6

How long must creditors be given to approve a PVA at a decision of creditors?

Answer 6

A minimum of 14 days’ notice.