Advice on Administration

20 September 2017

Hello. How may I help you?


Client
We are close to becoming insolvent as a company. We currently are in advanced negotiations with external investors who will take a 505 stake in our business. Are we better of  agreeing a CVA or going for a full insolvency and starting a new co debt free


Hi, I will need to ask a few questions before establishing what is the best route to take. Do you have a number I can call you on? its sometimes a bit easier to talk on the phone, but fine to continue with the online chat if its not convenient to talk?


Client
Currently on a train in the quiet section


KSA
no problem, I will ask away on here if that's ok?


Client
Yes of course


KSA
Is your company limited and what is it that you do?


Client
Yes it is and we fit ****


KSA
where in the country are you based and what is your average annual turnover?


Client
We are based in the ******, we have been going 18 months, turn over circa £1m


KSA
Ok great, do you currently owe HMRC anything for VAT, PAYE and corporation tax? if so what is the rough breakdown


Client
Vat £52k with a further £35k due September PAYE £45K No corporation tax


KSA
great, does the company have any bank debt? overdraft, loans, credit cards? again if I could have a rough breakdown that would be great


Client
None. We have an arrangement with Both Vat and Paye for a 10 month payment plan.


KSA
excellent, have you managed to keep up with the payments so far?


Client
We owe our merchants £150k, which we have also agreed a repayment plan


KSA
ok, do you have any other trade debt at all? if so what is the rough total excluding the 150k


Client
Yes we are we are due to pay £5k tomorrow which we can not know do. As our investment should have been done on Friday the 10th and we are still talking
Trade debt toal £25k
Circa £330k all in


KSA
how much are the investors looking to inject into the company?


Client
£350k for 30%

KSA
do you rent the premises that you trade from? is the rent up to date?


Client
It is my office and I allow the business to operate from there at no cost in an attempt to help


KSA
has anyone threatened any legal action on the company?


Client
No not yet.


KSA
what is the current collectable debtor book? do you use factoring at all?


Client
No debts to collect. That is our problem, we should have started a new contract in March, the April, then May but now it will be the 1st of August. We do some private work which we collect as we install,.


KSA
how much is the new contract worth?


Client
£2.5 M with a 30% gross margin


KSA
ok great, does the company have any assets at all?


Client
None, just computers and office equipment. Current written down book value £13k


KSA
ok great, thanks for answering all of that. I think there are a few options open to you. CVA (Company voluntary arrangement) basically a payment plan filed at court, CVL and phoenix (creditors voluntary liquidation) to close the company and set a new fresh one up to move on with, or pre pack administration could also work.
Dennis could I talk a number for you and get my colleague George Davis to call you a bit later, George is based in the midlands and will be able to come out and have a free face to face meeting to discuss the options at length

Client
Yes of course. 07*****. What is pre-pack administration. Our investors concerns are that we will not have enough cash flow head room. Our potential is alternative is to set up new co. Close one on the Friday and start agian on the Monday.


KSA
pre pack administration is very similar to CVL and Phoenix, but you would get to keep the companies name. Pretty much like you say, close on Friday and trade from a fresh on the Monday


Client
Can we really.? Can we buy the assests


KSA
yes absolutely
assets will more than likely go for a minimum if they only consist of used office equipment


Client
Agreed there is no other assests. How long does that take.


KSA
Administration can be done in a matter of days given that there are no secured creditors

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