What is Partnership Liquidation?
Winding up an insolvent unlimited partnership is generally a more complex matter than when dealing with a limited company, although there are many similarities in the processes involved. Notably, it may involve parallel action to deal with the affairs of some or all of the members of the partnership by seeking bankruptcy orders against them.
By contrast, a Limited Liability Partnership (LLP) would be wound up as though it was a limited company, either by way of a Compulsory Liquidation or a Creditors’ Voluntary Liquidation.
How do you wind up an insolvent unlimited partnership?
- Winding up the partnership as an unregistered company on the petition of a creditor or a third party such an insolvency practitioner but without concurrent petitions for the bankruptcy of its individual partners
- Winding up the partnership on a creditor’s petition with concurrent petitions for the bankruptcy of one or more of its partners
- Winding up the partnership on the petition of a partner with no concurrent petitions against the partners
- Winding up the partnership on the petition of a partner with concurrent petitions for the bankruptcy of all of its partners
- Joint bankruptcy petitions against all of the individual partners but with no petition against the partnership itself
Where one or more of the individual partners is a corporate entity, instead of a petition for its bankruptcy, a winding up petition against it will be necessary.
The decision on which winding up option an unlimited partnership might take must be based on a careful analysis of who owns its assets and who is responsible for its liabilities, as well as the separate financial positions of its partners.