Case study - insulation company

30 June 2014

This building insulation and treatment company was incorporated in 1979. One of the directors contacted Keith Steven of KSA to discuss the company’s present financial situation. After a subsequent telephone conversation with KSA regional manager George Davis, a meeting was requested and held the company’s offices. KSA were then appointed to assist the company in December 2013.


The company was the sole distributor of a resin based external wall coating for use in domestic and small-scale commercial applications.


Turnover for the 2013 financial year was of £608 with a loss of £61K. The company was encountering financial difficulties due to:
- under-capitalisation, which has prevented it from properly exploiting a significant opportunity, which is has, nonetheless tried to do, leading to an element of ‘over-trading’
- Government Grean Deal scheme where company had to wait 6-8 weeks for 50% of monies causing cashflow difficulties; ultimately leading to an in ability to procure materials and pay labour to complete orders.
- Failure of ambitious time to pay arrangement (TTP) with HMRC
Premises
- The company operated from leased premises; and were 14 months in arrears 

Employees:
- Apart from the director, all members of staff were made redundant and labour was to be contracted in as necessary.
Bank & Financial facilities
- The company had no loan facility
- There is an overdraft facility which stood £30K overdrawn .
- The bank provided the company with a credit card with a current balance of c£15K 
- The bank held security by way of a debenture.
- The director had provided personal guarantees.
- There were no other financial facilities.


Unsecured Creditor debt:
- c£201K of which HMRC was 55%
Unfortunately the director became increasingly hard to contact. During the last conversation, the director suggested that he would examine the company’s future, including the possibility of terminal insolvency (Liquidation) with the shareholders after which he would contact KSA with the outcome of that conversation.  


Due to continual non-contact KSA issued the director with an ultimatum that if no contact was received by the middle of April, then KSA would resign. No further contact was received, consequently KSA resigned from advising the company a few days after this date.

Categories: CVA, What is a CVA or Company voluntary arrangement?