Construction Business in the North of England

The Challenge

A Northern based construction company with a turnover of £3.2 million was in financial decline, primarily due to the broader recession’s impact on the industry. The business’s turnover had fallen by £400,000 from the previous year, and it was facing cash flow pressures from bad debts and a reduction in its overdraft limit. The company’s total unsecured debt was substantial, amounting to £761,000, which included £210,000 owed to HMRC.

The Solution

The directors sought professional insolvency advice from RMT KSA. After an initial meeting, KSA was appointed to develop a Company Voluntary Arrangement (CVA). This solution involved a restructuring of the balance sheet and secured some debt forgiveness from finance providers. The proposed CVA offered to pay unsecured creditors 35p for every £1 owed.

The Results

The CVA was successfully approved, first by HMRC on August 5, 2013, and then by the entire body of creditors on August 8, 2013. Although the process necessitated 11 redundancies, the CVA proved to be a viable alternative to liquidation, ultimately saving 24 jobs. The company was able to continue trading, and its creditors received a better return than they would have in an administration or liquidation.