IT Company Expanded Too Rapidly Leading To High Costs

The Challenge

A Birmingham-based IT company that supplied computers, software, and support to a national roadside recovery firm over-expanded after winning a major contract. The directors, believing they could replicate this success with many other clients, hired many new people and acquired new property. This aggressive expansion, however, led to significant financial distress and a large debt to its unsecured creditors.

The Solution

RMT KSA worked with the company to implement a Company Voluntary Arrangement (CVA), which restructured its operations and debt. The solution involved scaling the company back to its core products and sales. The CVA proposed to repay £220,000 of the approximately £400,000 owed to unsecured creditors over a five-year period. This allowed the company to regain stability and continue operating.

The Results

The CVA was successfully put in place, providing a positive turnout for creditors and the company. The company’s main client, a “blue-chip” firm, was aware of the CVA but continued to work with the business. This successful turnaround allowed the company to survive and continue trading, showing that a CVA can be an effective tool for debt restructuring while maintaining key client relationships.