Haulage Company Undercapitalised Due to Rapid Growth

The Challenge

A Norfolk-based haulage contractor with a £3 million turnover was facing a financial crisis. The business, which transported goods for a major discount retailer, was struggling from poor financial management and rapid growth without adequate controls. While a bad debt of £70,000 was the final trigger, the underlying issues were much deeper. The company owed £400,000 to HMRC from failed “Time to Pay” deals and had a total unsecured debt of £761,000. It was technically insolvent, failing the cash flow test, and at risk of a winding-up petition from HMRC, which could lead to a personal liability for the directors (due to extensive personal guarantees) and a frozen bank account.  A pre pack administration could have meant the loss of the Vehicle Operators License​​

The Solution

The directors contacted RMT KSA, who presented the option of a Company Voluntary Arrangement (CVA). The CVA proposal aimed to:

• Contain creditor pressure and improve cash flow
• Refocus the directors on running the business
• Restructure the balance sheet to repay creditors
• Allow the company to continue trading and grow

As part of the plan, it was also advised the company should hire a professional management accountant to improve its financial reporting.

The Results

The CVA was successfully approved with a 100% creditor vote, including HMRC. The deal proposed a dividend of 39p in the pound to unsecured creditors over five years, with a profit ratchet clause to potentially increase payments if the company performed better than expected.

RMT KSA’s quick intervention with HMRC prevented the winding-up petition from being advertised, thus protecting the company’s bank accounts. The solution saved the business from liquidation or administration, allowing it to continue trading and retain its Operator’s Licence, while also providing a better outcome for creditors.