One of the directors of the company contacted Marie Moody of KSA to discuss the company’s present financial situation. Then, after a subsequent telephone conversation with KSA regional manager Gary Weber, a meeting was requested and held in March 2012.
The building company was incorporated in July 2010 and specialised in fire and flood repair with the majority of its contracts generated from the insurance industry.
KSA was appointed in late March 2012 to assist the company on a Plan ‘A’, Plan ‘B’ basis:
- Plan ‘A’ - to propose a TTP (time to pay proposal) however if this was not acceptable, then
- Plan ‘B’ - a CVA (Company Voluntary Arrangement)
Turnover for the year to 30th September 2011, was c£642K with a net profit of £130K. In January 2012, the board identified that the company was encountering financial difficulties due to:
- A rapid expansion with insufficient investment.
- Extended debtor credit terms.
- The company operates from leased office premises and has approximately 1.5 years remaining on the lease
- The company employed 12 staff including the directors.
- There were no secured creditors in this case (secured with a registered legal charge or debenture)
Bank & Financial facilities
- The company had no overdraft or loan facility
- The directors had made loans of £8,000 available to the company and were therefore classed as Connected/associated creditors
- This class of creditor does not attract a dividend under the CVA.
Unsecured Creditor debt:
- £171K with one major trade creditor of £110Kof which HMRC was 30%. Which means that if HMRC had rejected a CVA, it would not have been approved.
During the production of the TTP/CVA It was necessary to negotiate with HMRC and trade creditors to prevent recovery and legal action from being completed. In early March 2012, HMRC levied distraint over the company’s assets and took 'control of goods'.
Last contact from the directors was in late July, approximately 5 months after KSA was appointed! The directors had up until then failed to provide all the necessary information to KSA. Lack of any progress only serves to make the creditors frustrated.
In late July, a letter was received from HMRC indicating that the case was about to be passed to the Worthing office for insolvency action.
There was no further contact from the company and on 12th September 2012, after all attempts to contact the directors and complete the work had failed, KSA resigned from the case.
Categories: CVA, What is a CVA or Company voluntary arrangement?