Software Company Struggling Due To Investor Fall Out

The Challenge

A software company with strong initial backing from venture capital and private investors faced a severe crisis due to an internal power struggle and product issues. A major fallout led to the removal of the Managing Director and two months of conflict. Sales then plummeted following a problem with the company’s product, and its backers refused to provide new funding. The company accumulated significant debts, including £70,000 in Revenue tax and £30,000 in VAT, plus £150,000 owed to other suppliers. The directors delayed taking action, and the situation worsened until the ex-Managing Director, whose compromise agreement was breached, issued a winding-up petition, forcing the board to finally act.

The Solution

RMT KSA was brought in to support with a rescue, despite the company’s precarious position. The rescue plan focused on a Company Voluntary Arrangement (CVA) to freeze the debts and allow the company to launch a crucial new version of its software. RMT KSA successfully dealt with three winding-up petitions, five County Court Judgements (CCJs), and numerous aggressive creditors. Negotiations with the bank secured a deal, and new investment was promised on the condition that the CVA was approved.

The Results

Despite the ex-Managing Director’s efforts to block the process, the CVA was successfully approved, protecting the company from further legal action. The new version of the software was launched and well-received, which, in turn, attracted new capital from the existing investors and a new investor who injected an additional £75,000. By March 2004, the company was profitable and cash-positive for the first time in 22 months. The ex-Managing Director’s debt was bound by the CVA. The company’s quick sales growth led to it being acquired by its main competitor in 2007, demonstrating a complete and successful turnaround.