Midlands Building Services Company Failed CVA

​​​​The Challenge

A Midlands based joinery and carpentry company, incorporated in July 2011, faced significant financial difficulties. The company’s problems stemmed from its purchase of aging assets and goodwill from a previous liquidation, two relatively small contract failures, and slow payment receipts from subcontractors. Compounding these issues was the failure of an ambitious Time to Pay arrangement with HMRC, which had been accruing debt for 18 months. The situation escalated when HMRC served a Winding Up Petition, which led to a major client terminating a £60K contract, causing a critical loss of turnover and making a rescue plan unfeasible.

The Solution

The directors contacted RMT KSA in late March 2014 to assist with a rescue. Although the company had taken steps to radically restructure and improve its profit forecasts, the loss of the significant contract due to the winding-up petition made a CVA proposal untenable. The directors, facing the immediate and devastating loss of a major revenue stream, decided to change their strategy.

The Results

The directors concluded that with the loss of the £60K contract, it was no longer viable to propose a CVA. They decided to cease trading and allow the winding-up petition to proceed, leading to the ultimate liquidation of the company. This case highlights how external events, such as a major client’s reaction to a legal filing, can swiftly derail a rescue effort, even when a business has a viable plan to restructure.