Building Company Hit By Project Costs

The Challenge

A construction company was facing severe financial difficulties due to a complex and large building project that went bad in 2011/2012. This, combined with historically poor financial management, led to a critical situation. The company’s inadequate record-keeping meant the directors had no clear idea of the extent of their problems. As a result, arrears to HMRC of approximately £131,000 had built up. Despite the directors taking proactive steps to reduce costs and appointing an internal financial controller, the company could not service its debts as they fell due. With trade creditors owed £141,500, HMRC owed £114,000, and a winding-up petition from a leading building supplier, the business was on the brink of collapse.

The Solution

The directors sought assistance from RMT KSA to manage their crisis. A key part of the solution was to propose a Company Voluntary Arrangement (CVA) to the company’s creditors. While the CVA document was being finalized, KSA negotiated with the creditor who had issued the winding-up petition. This was a crucial step, as RMT KSA successfully prevented the petition from being advertised, which in turn stopped the company’s bank account from being frozen. KSA also assisted the company in securing new banking facilities, as their current bank had refused to provide one. This action provided the company with the financial breathing room it desperately needed to get the CVA approved and continue its operations.

The Results

The CVA proposal was successfully filed, circulated, and ultimately supported by the body of creditors. The CVA’s approval provided a legal and structured framework for the company’s recovery. By preventing the winding-up petition from being advertised, KSA ensured that the company’s financial lifelines remained open. The company was able to reorganize its debts, address its poor financial record-keeping, and move forward on a more stable footing. The CVA proved to be the ideal tool to rescue the business, demonstrating that even a company with complex problems and aggressive creditors can find a path to survival and continue to trade successfully.