Construction Rescue and Liquidation Services

Every construction business is different, however there are particular issues that construction businesses face, which are unique to the sector. The form of contract being principal among the problems faced. Whether you are using JCT contracts, NEC contracts, Cost Plus contracts or Lump Sum contracts, many firms have problems with contracts and their customers! These can lead to cashflow and solvency problems for your company, partnership or LLP.

That’s where we come in. Often with low margins and tough trading conditions, cash flow can be a problem. Below are some of the common problems we’ve seen happen in the industry:

Contract arguments and QS problems.
Bad debts.
Delays in repayments from HMRC, regarding CIS deductions (which are connected to PAYE scheme). HMRC can be slow in making CIS refunds, leading to issues with cash flow.
Time to pay deals with HMRC for PAYE and VAT (where applicable) being too expensive for your cashflow.
Losses made on large contracts, where large clients or main contractors slow down payments and sometimes go into administration. Hitting YOUR cashflow.
So called “subby bashing”.
Issues with sub-contractor non performance or slow completions.
Difficult customers, be they private individuals, clients or contractors – who add extra work on and won’t pay extra!
Lengthy contracts with material prices agreed at beginning. I.e. quotes do not keep up with rising costs. Especially tough after huge price rises in recent years.
Less focus on financial accounts, financial management due to directors and management being onsite.
Hard to win new contracts if cash flow is tight, perhaps due to low credit rating.
Retention sums not released at agreed times.
Suppliers taking legal actions such as County Court Judgments, or even issuing winding up petitions.

As turnaround practitioners with expertise in the construction sector going back to 1996 when we did our first rescue of a north east construction firm, RMT’s construction specialists can help tackle these issues with you to get your construction or building business back on track. We can go through all the available options, like expert assessment of the issues your company faces, showing you how to improve financial reporting, securing long term Time to Pay deals with HMRC and suppliers, writing powerful CVA deals and getting your costs down (cash free) and pre-pack administrations. Obviously many construction companies are no longer viable and creditors voluntary liquidation may be necessary. See our rescue stories below where we have helped construction companies!

If you are looking for extra funding, or even just a change in finance provider, then please consider our financing services that we offer on our sister site www.companyfundingoptions.co.uk. We have lots of experience in funding construction companies!

We also have industry specific turnaround experts who can act as non-executive directors, chairman or turnaround managers. We have turned around construction companies from £500k to £65m sales.

Call us on 0800 9700539 for free expert advice and a talk through your options. We can visit you onsite to discuss your specific situation after we have run our “anti money laundering” and “know your client checks” that all professional and regulated businesses must do before engaging with prospective clients.

Case Study 1 – 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 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 to intervene in the crisis. RMT immediately negotiated with HMRC, explaining that a Company Voluntary Arrangement (CVA) was being proposed to address the company’s debts. RMT’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.

Case Study 2 – Scaffolding Company Suffered From A Burglary

The Challenge

A construction company, which served as both a main and a sub-contractor, faced significant financial difficulties despite a turnover of approximately £800,000 in the year to June 2012. The company’s problems stemmed from being undercapitalised, facing interrupted contracts, dealing with bad debts, and operating in a highly competitive environment. The situation was made worse when a major client withheld a payment of around £77,000. After a period of costly arbitration, the directors were forced to accept a greatly reduced payment of just £14,000. The company was burdened with a substantial unsecured debt of approximately £229,500, with HMRC holding a massive 90% of that debt at around £208,000. The directors, who had previously experienced a company liquidation due to over-ambitious CVA forecasts, were under immense pressure to find a viable solution.

The Solution

Having learned from past experience, the directors contacted RMT, who was appointed on August 14, 2012, to assist with a Company Voluntary Arrangement (CVA). The CVA was chosen as a a strategic tool to provide a better return to creditors than a liquidation, while allowing the company to continue trading. The CVA proposal offered a dividend of 33 pence in the £1 to unsecured creditors. The company’s directors had a strong desire to avoid the mistakes of their previous business, which had failed to deliver on an over-optimistic CVA. Therefore, they worked closely with RMT to ensure the CVA proposal was a realistic and achievable plan that took into account the tough market conditions and the company’s financial realities. RMT also took on the crucial task of negotiating with HMRC, which was the largest unsecured creditor.

The Results

The CVA was a complete success. Although HMRC initially rejected the proposal, RMT successfully appealed to the Voluntary Arrangement Service, leading to HMRC’s approval with standard modifications. With HMRC holding 90% of the unsecured vote, their acceptance assured the outcome. The CVA was formally approved by the body of creditors at a meeting in Weymouth on March 5, 2013. This outcome provided the company with a legal and structured way to manage its debt and continue its business operations. The CVA was instrumental in saving 9 jobs and provided a better return to creditors than a liquidation would have. The case demonstrates that even a company with a history of financial struggles and a high tax debt can find a path to recovery through a CVA, particularly when the directors are committed to a realistic and well-supported plan.