Childcare Company

​​The Challenge

A Scottish company from the childcare industry was facing significant financial difficulties. Since its incorporation, the business was undercapitalised, a problem compounded by its commitment to new premises and renovations without securing the necessary funding. This led to persistent cash flow issues and mounting arrears with HMRC and trade creditors. A 10% drop in turnover in 2009 due to changes in parental funding exacerbated the problem, leaving the business with nearly £100,000 in unsecured debt. To put into numbers, the company had a turnover of £292k which was a fall of £44.5k year on year.

The Solution

The company’s board, recognising the crisis, sought professional advice from RMT KSA in March 2013. Before the formal appointment, the company initiated its own cost-cutting measures, including a staff non-replacement policy, a reduced working week for existing employees, and increased advertising to attract new clients. When RMT KSA was appointed, they were tasked with drawing up a CVA (Company Voluntary Arrangement) proposal.

The Results

The CVA was a success, approved by the body of creditors with a dividend of 40p in the pound. The largest creditor, HMRC (64% of the total debt), approved the CVA with standard modifications. The successful rescue mechanism enabled the company to resolve its debt issues and continue trading, ultimately saving 24 jobs. The company was able to survive and navigate its financial difficulties due to the proactive measures taken by the board and the structured rescue plan provided by RMT KSA.