HCR Law Events

22 April 2020

I fear that my partnership will run out of money in six weeks’ time despite having furloughed as many of our staff as we can. Is there anything else that I should be doing?

Partnerships, large or small, have both informal and formal rescue vehicles available to them.

The insolvency legislation provides two formal mechanisms – partnership voluntary arrangements and partnership administrations, designed to relieve the burden of debt while preserving the underlying business for the benefit of the dentists concerned.

The test for whether or not a partnership is insolvent is whether or not it is unable to pay its debts as and when they fall due, or its assets, when realised in cash, will be insufficient to pay off its debts and other liabilities.

The partnership voluntary arrangement has been available since 1994.  The partnership can enter into a binding arrangement with its creditors, including an element of repayment and an element of debt forgiveness, to enable an improved outcome for the creditors and to allow the business to survive.

The support of 75% of creditors in value is needed.

The partnership administration has also been available since 1994, but was fundamentally altered in July 2005 to allow for the partners to appoint an administrator without needing to make an application to court.

Unlike the partnership voluntary arrangement, a partnership administration provides a period of grace under which no creditors can bring any action against the partnership, enabling the partners to assist the administrator in the best way forward for all stakeholders.

Control of the business in a partnership administration passes to an insolvency specialist whereas in a partnership voluntary arrangement the day to day running of the business remains under the control of the partners.

These rescue vehicles are available to all unincorporated dental partnerships, whether they rely upon purely private patients or a mixture of private and NHS work.

It is vital that if you think that your practice is heading towards running out of cash, you should, as soon as you begin to worry about this, contact professionals who are qualified to advise you on how these, and less formal, rescue vehicles work.

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Derek Jones, Consultant

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