The business traded since the late 1980s, within the farming sector, specialising in cow chiropody and foot trimming. After initial scepticism, the business succeeded in establishing itself with a strong customer base. In 2001, with the outbreak of foot and mouth, the business became severely threatened and had to diversify into industrial work to survive.
In 2006, with a turnaround in the dairy industry, the business was able to revert to its former niche market. This time, the business expanded to include the manufacture of a relevant product range. The business survived the 2008-9 financial crisis. Despite a reduction in sales and a number of bad debts, it was considered that expansion was the way forward with an increased product range.
In 2011, the decision was taken to incorporate the business. During the next two years, the company traded successfully with its expanded product range. However, in 2013 the company experienced a significant drop in turnover as a result of a lack of finance in its customer base, caused by decreased milk prices and increased feed and input costs.
The director admitted that he was slow to react to that crisis and delayed too long, the reduction in overheads. Redundancies were necessary but the director was conscious that by cutting staff numbers, skill sets would be lost. These skill sets can be difficult and costly to replace.
The director was optimistic about forward orders but knew he needed help with the historic position, including creditor debt, and the cutting of overheads. After close scrutiny of the company’s financial position, the decision was taken to engage KSA to assist with the preparation of a CVA proposal document to be put to the company’s creditors.
The CVA was used as a tool to restructure the company. Necessary redundancies were made and included within the CVA. The director relieved of the stresses of dealing with creditors on a daily basis, was freed to concentrate on the running and developing the restructured company. The product range was expanded taking advantage of advances in technology. A new improved website was designed and the company embraced social media techniques, which kept customers updated with product news.
Careful forecasting was prepared alongside the careful cutting of overheads. The detailed CVA proposal was put to creditors and accepted at the creditors’ meeting. Through the CVA process, the company has stabilised with a strong order book going forward.
Categories: CVA, What is a CVA or Company voluntary arrangement?