Partnership Simultaneous Individual Voluntary Arrangements (SIMIVAs)

If the partners believe in the fundamental viability of the business and are determined to fight for the business to help survival then a rescue mechanism exists that can be a powerful tool or framework for the restructuring of the business.

It must be understood that this mechanism is not easy; the partners must be prepared to prove viability of the business and to reveal their personal financial affairs to their creditors. Above all the partners need to be determined and united to make this technique work

If you would prefer a pictorial flowchart click here "SIMIVA". If you would prefer frequently asked questions guide to help you understand the longer guide click here "SIMIVA FAQ’s"

So what is an individual voluntary arrangement (or IVA)?

IVAs: introduction

The best way to think of an individual voluntary arrangement (IVA) is as a deal between the debtor (the person or partnership that owes the money) and the creditors; the people or businesses to whom the money is owed.

Where the debtor cannot pay off his or her debts on time or they are insolvent (for a definition of insolvency click the are you insolvent? guide) or if your partnership is under huge pressure and you cannot deal with the creditors satisfactorily, than a SIMIVA can often be a good solution.

Making a payment on a regular periodic basis the partnership and the individual debtors can bring together all of his or her debt problems (except where the creditor has security such as a mortgage over property) and get on with their business and their lives.

Who should use a SIMIVA or Interlocking IVA's?

It is imperative that the SIMIVA is used where a partnership’s business is viable or where it or the debtor has disposable assets that can be turned readily into money in the short to medium term. Using the IVA can allowed time to sell such assets for better value than a bankruptcy trustee can obtain.

If the business isn't viable it should be wound up (see winding up the partnership) as soon as possible and individual bankruptcy initiated if required.

To understand the IVA process please read below

IVA's a guide

See IVA's a flowchart for easy-to-follow pictorial view of the IVA process.

Debtors who run small or not so small businesses as a sole trader or as a partner in a partnership can often find themselves in a position where the business is struggling financially.

Most small businesses in the UK suffer from being undercapitalised at some stage. It may be that you did not have enough money to start a business off, that the bank or other financial providers are unable to fund you to the level you needed; or that you have had bad debts: failed contracts or simply have not managed to get the business to a level of making profits yet.

The partnership/debtor is usually under extreme cash flow pressure and cannot manage the problem. Business is suffering because the partners are fire fighting and not concentrating on running the business. This can become all-consuming. Dealing with irate creditors is also a very tiring and lonely process. This can often lead to a downward spiral towards the closure of the business and bankruptcy of the individuals.

If you're in this position you should follow this guide, IVA's FAQ’s and IVA’s flowchart and also compare the other options. Prior to doing this, it is best to look at your objectives pages, do's and don'ts and your options before deciding which is the most appropriate.

After that if you have decided that the Individual Voluntary Arrangement is the most appropriate route, make a list of all of your creditors. Don't make the mistake of saying a creditor isn't due for payment now, include all current and future debts.

For example, we often meet partners and sole traders/individuals who have habit of "compartmentalising" their debts. An example is: they know the VAT isn't due until the end of the month after this and therefore they don't see it as a liability. It IS a liability now and one should estimate to an appropriate point in time (say the end of the current month) how much is due to every creditor.

It is possible to estimate these debts because sometimes it’s impossible to make detailed and exhaustively accurate lists. The law allows for an estimated statement of your debt to be used as the basis for preparing a proposal to deal with that problem.

Then make a list of all of the partnership’s assets and all of the individual partner’s assets. Put reasonable values on them and if you cannot ascertain values for assets estimate – try getting an idea from similar assets or priced assets. (Use the internet to get car valuations etc). The law doesn't envisage you going out get professional valuations for every asset because this would be too time-consuming and costly.

Perhaps the most important process to go through is to look dispassionately at the business and decide whether it is viable. For example see 99 marketing questions. Decide whether there is enough activity for your business to be profitable with its current overheads or if it were to be restructured.

Often it can be just down to removing a couple of problem areas which if resolved could lead to the business being viable. If so, we can help in such a restructuring, please call us on 0800 9700 539 for assistance.

If however the business has never made profit, sales are not rising to the level where overheads start and known prospects aren’t great then a SIMIVA is not suitable.

Now that you have established the true position the business' debtors, creditors and its viability you should consider the IVA process. If you wish to discuss your information contact us or any local insolvency or turnaround practitioner. We will talk you through the issues of viability, determination and ability to structure a deal free of charge. Call now or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Once a decision is taken to go ahead you will need to appoint a turnaround advisor and or a nominee. An advisor would assist you in building the proposal, collating all the necessary information and dealing with all of the aggressive and passive creditors. The advisor may also seek to discuss the position with your bank and secured lenders, the Inland Revenue and VAT Office. At some stage however a nominee is necessary. A nominee is a short name for the nominated supervisor - this is a licensed insolvency practitioner for licensed by the DTI and is usually a chartered accountant in this country.

The nominee's job is to review the proposals of the debtor produced either by the debtor himself or by the advisor in conjunction with the debtor. If he can satisfy itself that the proposals maximise creditors interests, are achievable and realistic he or she will put their name to the proposal and sponsor it to the court and to the creditors. It is important to remember that the proposal will be your proposal and that you have to swear an affidavit saying that is true incorrect to the best of your ability.

Writing the proposal

The law envisages that the debtor(s) will write the proposal and then ask an IP to act for him or her. Of course the legal process is complicated and you have a business to run. Therefore it is probably best to use experienced, pragmatic and respected Turnaround practitioners like KSA CompanyRescue or insolvency advisors to help you write the proposal. Regardless of whom you use the following points should be remembered:

1. Base it on sensible cashflows, sales and costs. Don't guess, don't expect large increases in sales.
2. Expect that things in the first year will be a difficult and that sales may indeed fall.
3. As a result expect to suffer in the first year and do not promise to make large payments in the first year the maximum amount in we would usually allow most debtors to repay in the first year is £12,000 for a partnership or less for an individual debtor.
4. Don't promise too much but as above make sure the repayments are affordable.

IVA Proposal contents

The proposal should include a current description of why the business has failed and why it is insolvent. It should also detail what the structure of the deal is and how the creditors are going to be repaid. To help the creditors decide whether to accept the IVA it must contain what is called a statement of affairs. Or SOFA for short. A SOFA paints a picture of your financial position and demonstrates that you are insolvent. It will also show what would happen if you went into bankruptcy and what the outcome would be if the IVA were approved and successful.

The document will describe how long the deal is for. Typically most IVA's last between three and five years. And the document will describe how much the debtor will pay from the business in the months and years ahead to his/her creditors.

After the document has been completed and the affidavit sworn it can be filed at court. The purposes of this are to ensure that the document that is filed at court is the same that is circulated to all creditors and to apply for a moratorium (called an interim order) to protect the debtor in the period between the application to court and the date of the creditors meeting.

Once this process has been completed a creditors meeting is called a please see diagram below for a quicker understanding of the mechanism and the timing.

There are two methods of applying for an interim order to protect the debtor.

The first is to apply or make an application for an interim order prior to the proposal being completed. The second is to use a method called a concertina application this just means that the application for the interim order and a proposal filing happens at same time. This is often the most efficient and cost-effective method.

The interim order: a description.

As described above if the pressure is intense on the debtor it is possible to obtain protection from the court or an "interim order". This protection means that creditors may not petition for your bankruptcy without the permission from court. All actions by bailiffs or Sheriffs are stayed (which means frozen) until such time as a creditors meeting can be held. For further details and discussion on the legal actions discussed above please see our legal actions guide.

Creditors meetings and voting

After the proposal has been filed and posted to every known creditor, a creditor’s meeting is called. As seen above, there is a statutory minimum period of 14 days before this creditors meeting can be held from the date of the receipt of the document by the creditors. This is to allow adequate time for them to consider the documents contents and to make objections or modifications.

SIMIVA’s – How do they work?

The experienced turnaround advisor or IP will ensure that all work is done simultaneously and that the proposals are interlinked. Simple explanations for the creditors and debtors will be necessary. Creditors meetings will be held at the same time and the votes that are necessary as above will be cast for each proposal.

Effectively the partnership deal sits as a raft atop the two or more individual debtor’s VA’s

This is complex stuff, get good advice! Call us now on 01289 309 431 or free on 0800 970 0539