Company in Construction Sector Hit By Costs, Regulation and Accounting Problems

The Challenge

A Bristol-based maintenance, construction, renovation, and repair company, which served homeowners, landlords, and large businesses throughout the South West, faced significant financial difficulties. The problems stemmed from a combination of being undercapitalised, poor cost and employee control, and a number of accounting irregularities. Despite the board identifying these issues in September 2013 and taking proactive steps—such as remedying its accountancy, introducing a costing system, and migrating to self-employed subcontractors—the company was burdened with legacy debts that it could not service. The situation reached a critical point when HMRC took walking possession of the company’s assets for a total liability owed to the Crown, with auctioneers scheduled to uplift the goods the following week. The company was on the brink of being shut down completely.

The Solution

The company appointed RMT KSA to intervene in the crisis. KSA immediately negotiated with HMRC, explaining that a Company Voluntary Arrangement (CVA) was being proposed to address the company’s debts. KSA’s quick action and communication convinced HMRC to suspend the uplift of the assets, a crucial step that bought the company the time it needed to prepare and finalize the CVA proposal. The CVA provided the necessary legal framework to restructure the company’s debts, which a trading-out strategy alone could not have achieved. The company’s prior efforts to improve its accounting and cost controls demonstrated to creditors that it was a viable business with a strong future plan, providing a solid foundation for the CVA proposal.

The Results

The CVA proposal was a complete success, as the body of creditors, including HMRC, supported and approved the plan. This outcome allowed the company to continue trading and successfully navigate its financial crisis. By preventing the auction of its assets, the CVA ensured that the business could maintain its operations and its capacity to earn revenue. The company was able to service its legacy debts through the CVA process, a much better outcome for creditors than a liquidation would have provided. This case demonstrates that even when a company’s assets are under immediate threat from an authority like HMRC, a well-executed CVA can provide a powerful legal tool for a business to gain breathing room, restructure its finances, and successfully continue its operations.