Midlands Based Shop Fitting Company Declining Sales

The Challenge

A Midlands based shopfitting company, incorporated in 2008, faced significant financial difficulties. It suffered a decline in orders from its main customer, leading to a loss of £38K in the year ending January 2013. The company had a large HMRC debt of £92K, which constituted 94% of its total unsecured debt, and HMRC had already commenced recovery action. Additionally, the company had £6K in lease arrears, and the director had personal guarantees and a history of two previous insolvencies.

The Solution

The director contacted RMT KSA, who were appointed to assist the company in June 2013 with a Company Voluntary Arrangement (CVA). A CVA proposal was prepared, forecasting a slight increase in turnover and a return to profitability in the first year. The plan was designed to save three jobs without any redundancies. The CVA was filed at court and distributed to creditors.

The Results

The CVA was initially rejected by HMRC. The creditors’ meeting was adjourned for two weeks to allow the company to provide additional information. HMRC then approved the CVA but with strict conditions, including a maximum salary for the director and a requirement for additional funds to be deposited with the supervisor. Unfortunately, the director was unable to raise the additional funds, and as a result, the CVA was ultimately rejected. This failure meant the company could not restructure its debt and was left to face the consequences of its financial distress.