If a partnership (other than an LLP – see below) owes debts, all of the partners will, on the face of it, be jointly and severally liable to repay sums owed.
The position in insolvency law is governed by The Insolvent Partnerships Order 1994. This created a hybrid of individual and corporate insolvency law, whereby bankruptcy of one or more partners is a possibility as well as the winding up of the partnership.
If you are a partner in a non-LLP partnership it is crucial that you obtain independent legal advice at the earliest opportunity given that your interests may be very different from your partners and given the complexities of this area of law and possible consequences.
It is not generally a requirement that a creditor must pursue all partners. Creditors may decide that one or more of the partners are more likely to pay and seek to pursue those individuals.
Limited Liability Partnerships (LLP)
A Limited Liability Partnership is a hybrid between a partnership and a company in that it has features of both. The primary difference between a partnership and an LLP is that, unlike a regular partnership, the members of an LLP are not generally liable for any outstanding debts the partnership incurs because, like a limited company, an LLP is a separate legal entity from it’s owners.
Contact us for a free no-obligation initial discussion about partnership insolvency.