Company Voluntary Arrangement Case Study
The Problem Presented
We received an initial enquiry from a trade supplier who was being threatened with a winding-up order from HM Revenue & Custom (HMRC). Due to the economic down turn the company was experiencing a reduction in turnover and profit which meant they had fallen into arrears with their trade suppliers to whom they owed approximately £100,000 and HMRC with who they owed £58,000 in PAYE.
An initial meeting was arranged the next day in order for us to go through;
- The company’s current position
- Potential cost saving routes
- A review of future orders for the company
These reviews highlighted that the economic downturn had hit the company hard which saw the new customer relationships they had built have little impact on the turnover of the company. The review did show that the company had potential for good future orders from these new relationships and so the directors indicated they wanted to continue trading if possible. Therefore a Company Voluntary Arrangement (CVA) was proposed.
How we helped
Once a CVA was agreed upon by the directors we drafted cash-flow forecasts for the company, put proposals together for the creditors to highlight the encouraging future trading of the company and we also convened the creditors meeting. This was all done within 6 weeks of the initial enquiry.
The proposal offered creditors 72p in the £ over 5 years and during the creditors meeting we obtained the support needed for the proposal to be accepted and the CVA was approved.
The company now
Since the approval of the CVA the company has traded successfully and has maintained its commitments to the arrangement. It has now exited the CVA and is free to continue trading whilst the outstanding balance due to creditors will be written off in full.
How a CVA can help you
A CVA is an effective business rescue tool for limited companies who have a prospective company to trade forward.
It is a process that helps to clear historic debt that is holding an otherwise profitable company back. The agreement will need to be agreed by creditors in order to proceed.
For further details with regards to this business rescue process contact one of our Insolvency Practitioners today.