Plumbing Company Hit By Clients Going Bust

​​​The Challenge

An East Anglian plumbing company with a turnover of £616,000, despite growing, faced severe financial difficulties due to a combination of factors. The company had suffered a series of bad debts totalling £100,000 from major contractors going into administration or liquidation. This led to serious arrears with trade suppliers and an increasing burden from HMRC debts. Although the company had reduced its staff by half over two years, it was still operating at a significant net loss of £90,000. To make matters worse, a trade creditor had served a winding-up petition, threatening the company’s existence.

The Solution

The company’s directors contacted RMT KSA to explore a Company Voluntary Arrangement (CVA). This option was considered to manage and repay the company’s unsecured debt, which totalled £169,000. As part of the plan, RMT KSA assisted in making two more redundancies to further reduce costs. A unique aspect of the plan involved connected creditors (the directors) proposing to convert a portion of their debt into convertible redeemable preference shares, with the remainder being written off. An adjournment was secured for the winding-up petition to allow the CVA process to proceed.

The Results

Despite the initial CVA plan, the directors ultimately decided that the company was no longer viable. The CVA was abandoned, and the directors intended to let the winding-up petition proceed. However, the petitioning creditor failed to advertise the petition in the required time, leading to its dismissal. Subsequently, the directors decided to place the company into a Creditors Voluntary Liquidation (CVL). The liquidation process, however, did not proceed as the company failed to return the signed engagement paperwork. Ultimately, neither the CVA nor the CVL was completed, leaving the final outcome of the company’s situation unresolved in this narrative.