CVA Case Study – Hampshire Based Garden Services company

The director of the company contacted Sarah Massey of KSA to discuss the company’s present financial situation. Then, after a subsequent telephone conversation with KSA regional manager, Hugh Gabriel, a meeting was requested and held at the company’s premises.

The company operates within the landscaping sector and specialises in domestic gardening services. KSA was appointed to assist the company with a Company Voluntary Arrangement (CVA) in late 2014. Turnover for the previous 12 months had fallen by c£80K, to c£300K. 

The company was encountering financial difficulties due to:

• Undercapitalisation
• Rapid an expansion
• Excessive overheads and 
• A large bad debt.

Premises

• The company operates from the directors’ home and associated business premises.
• The company also rents two other units 

Employees:

• The company employs 18 staff including the directors
• The work force was reduced by a total of 5 during late 2014.

Bank & Financial facilities:

• The bank provided an overdraft facility of c£40k which was secured by a fixed and floating charge over the company’s assets.
• There was also an outstanding unsecured loan of c£10K
• There were 5 outstanding financial agreements in respect of motor vehicles.

Director:

• The directors had provided Personal Guarantees (P.G) to the bank in respect of the overdraft facility.
• The directors made loans of c£7k available to the company and were therefore classed as connected creditors: It is a usual HMRC modification (condition of acceptance) that all connected creditors agree to waive there claim to any monies owed and that claim does not survive the CVA.

Unsecured Creditor debt:

• c£130K of which HMRC was 92% 
• Cost & overhead reduction 
• The workforce was reduced to cut costs.

The company had administration issues to rectify to ensure that connected businesses were kept separate. Early in 2015, after a review of the company’s current position, the director decided he no longer wished to continue with the CVA and that the company could continue without further assistance from KSA.