CVA Case Studies

  • Business Events & Conference Organisers
  • Computer Software Company
  • Regional Haulage Company
  • Kitchen and Bathroom Products Distributors
  • Personal Injury Claims Company
  • Coach Hire Company

Business Events & Conference Organisers

The directors of the company came across our website and contacted us immediately for assistance with their mounting debts which included £400,000.00 of HMRC tax liabilities.

Although the business had been very profitable over the 33 years it was in business, the latter few years suffered a dramatic fall in the number of sales by up to 50%.

The management took a number of steps to try and bring the business to its usual annual turnover and tried to restructure the company, reduced staff and tried to cut cost where possible, but their efforts were fruitless.

Once we were instructed we did a full analysis of the business and surrounding financial circumstances. We concluded that the best way forward was to use a CVA to restructure the balance sheet and were almost immediately able to freeze £275,000.00 debt which had built up in 2003.

We were able to secure investments from key shareholders of the company and effectively worked alongside the directors and restructured the company. We were also able to introduce new management to help relieve the major distress of the 2 directors of the company whilst having to make 8 staff redundant.

The supervisor appointed to manage the CVA was able to convert reasonable amount of assets into cash and will pay a dividend to creditors when appropriate. If we did not take these measures the company would have had to face the unavoidable consequences of liquidation condense of assets.

Computer Software Company

This company had a number of investors, 2 Managing Directors and a Chairman who all had a number of disagreements regarding the company which subsequently caused business sales to fall. In addition to this there was a problem with a large batch of the product and the investors refused to provide additional funds.

We managed to get the build up of debts frozen in order to give the company time to issue v3 of its software. The company had debts of £150,000.00 HMRC with interest, penalties and surcharges amounting to £30,000.00. The company also had 25 other creditors who it owed £470,000.00 in total.

After we carried out an assessment of the business we knew immediately that the best way forward for the company was a CVA. However, the directors of the company were not agreeable to our recommendation and decided not to use our services. Within the next month the company contacted our offices again as they had no luck in resolving the matter but in fact the matter had worsened as now the company were not repaying the banks for loans borrowed and the bank was threatening to withdraw their overdraft facility.

To make matters worse a bankruptcy petition was issued on the company and the company immediately instructed us to deal with the matter.

We had to very quickly implement a CVA to protect the company whilst dealing with 2 petitions, 4 CCJ’s and try to come to an agreement with the creditors who were not very forthcoming. We then contacted our client’s bank and addressed all their concerns whilst successfully getting them to agree to additional funds for the business.

Three months into the CVA, we found that the sales were still insufficient but the new version of the software was launched successfully. Any additional investments made were strictly not available for creditors.

Regional Haulage Company

A multi million pound haulage company was referred to our team for assistance with their tax debts and other creditor debts who were all pressing for payment.

Although the company had been trading successfully for over 10 years, things started to fall apart when the MD fell critically ill and was unable to oversee the running of the business.

During this period the accounting of the company was not well driven with debt mounting by the day with interests, penalties and surcharges being applied.

The company also had around 40 different vehicles on HP; lease and contract hire the company had too many vehicles, too much debt to service every month and a loss making business.

The MD once returned quickly realized there was problems with the accounting and took steps to employ an additional accountant who after analyzing the accounts confirmed that the company will inevitably fail and estimated that creditors will be pursing legal action within an 8 week time frame.

The accountant contacted our offices for advice on how to best overcome the situation the company was in and in order to rescue the business we worked closely with the insolvency practitioners in assessing the problems of the business and its viability.

We were able to compose a plan to rescue the business which involved

  • Introducing a CVA to the company in order to remove VAT, PAYE and tax pressure from HMRC
  • Working with the company’s bank to restructure the secured lending facility
  • Restructuring the 40 leases and HP agreements to allow the company’s cash flow some breathing space, whilst losing some of the vehicles.
  • Aggressively managing the cash coming into the business, improving accounting and introducing a non executive director to oversee the recovery.

The plan has been successful under which the company has been able to pay off the bulk of their overdraft and loan from the bank.

Tax and trade creditors will under the CVA receive up to 40p in £1 over 5 years.

Kitchen and Bathroom Products Distributors

This company distributed kitchen and bathroom furniture to small retailers and plumbers across the UK. The MD had set up the company over 30 years ago and the company had a usual annual turnover of £2.5 million

The company developed at a rapid pace and did not have sufficient capital to service the growth. In addition the company lost one of its key suppliers which caused even bigger problems.

We built a CVA proposal which was based around 6 creditors who were in total owed around £370,000 of tax and unsecured creditors’ money and restructured it over 5 years.

The CVA was approved by 100% of the creditors and to help further expand the business the owners re-mortgaged their home to provide £50,000 of new capital to support the growth of the new company.

Personal Injury Claims Company

This company had been trading for over 10 years and with its success managed to open an additional 4 offices based throughout the UK. As the company was doing well the directors were looking to expand further an open another 2 offices which unfortunately collapsed causing the company’s costs to overcome the budget of the company. A large loss was made and the level of temp staff employed who were being trained in the 4 offices to then work at the 2 new offices meant there were excessive PAYE debts to be paid.

Although the MD’s tried to get the business back on track, the level of loss incurred meant that his attempts were unsuccessful.

We initially put in place a time to pay arrangement with HMRC for the tax liability but after 6 months into the arrangement the company struggled to keep up with the payment arrangement and were issued with a winding up petition.

We managed to get HMRC to agree not to advertise the petition and 2 months later it transpired that the company had strong cash balance as it did not have to pay PAYE and VAT for that time using the CVA we put forward.

The CVA proposal was that it would pay 40% of its future profits after tax and a one of £100,000 was paid across the supervisor within 3 months. The overall dividend paid for creditors was 45p in £1. Consequently the creditors (mainly HMRC) got a good return in the 1st year and were agreeable to the CVA proposals.

Coach Hire Company

This company had only been trading for 3 years but had grown rapidly earning £800,000.00 in sales.

After an initial assessment with the MD of the company of the company and its accounts we quickly realized that the underlying problem was the poor management of the company as it was clearly viable.

Although the first two years had been extremely profitable for the company, the third year caused the company to suffer severe losses.

We did an in depth evaluation of the business and also found errors in the accounts. We implemented a CVA which was very much needed to reorganise the debts incurred particularly over the last year of trading which was primarily built up of PAYE and VAT.

We provided assistance to the board by imposing restructural changes to improve marketing, cost controls, and the accounting of the company to ensure the company gets back its usual profitability.

Now, the company is continuing to expand but is efficiently controlled with monthly accounts and board meetings to drive the day to day running of the business.

Under the CVA we were able to reorganise the vehicle finance, made some of the drivers redundant and helped the company relocate to more appropriate offices/depot which in turn brought in more business