Recruitment Company Attempted Rescue

The Challenge

A fast-growing recruitment company with £3.3m in sales faced a sudden crisis when its strong Managing Director became ill. In her absence, the company suffered from poor management, leading to a decline in sales and a buildup of debt. Note that in this tight financial situation, the managers had continued to recruit staff despite falling sales. When the Managing Director returned, she discovered the critical financial situation, with the company unable to pay salaries and its overdraft having increased.

The Solution

The Managing Director contacted RMT KSA for help. RMT KSA recognised her strong track record and believed that if she were fit enough, a rescue was possible. They proposed a Company Voluntary Arrangement (CVA) to restructure the company’s debts. The business was downsized to cut costs, and unproductive managers and staff were let go. The CVA proposed a dividend of 43 pence in the pound to creditors over five years.

The Results

The rescue attempt was unfortunately unsuccessful. The Managing Director, still recovering from her illness and overwhelmed by the stress of the turnaround, made a critical oversight that led to the loss of the company’s biggest client. This loss caused sales to fall below a viable level, and the Managing Director’s drive was no longer there to rebuild the business. She made the difficult decision to close the company down.

However, despite the failure of this specific business, the story has a positive personal outcome: the director fully recovered from her illness and went on to successfully run another recruitment company in East London.