CVA rescues stationery supply company after winding up petition

This company was Incorporated on January 2000 and supplies specific stationery within key professional sectors. One of the directors contacted KSA after reading the website. A meeting was subsequently held between the directors and Russell Mallen for KSA.

KSA were appointed to assist the company in October 2010.

Turnover for the 2010 financial year was of £170k, half that of the previous financial year.

The company was encountering financial difficulties due to:

•  Poor financial and management advice given to the company three years ago.
• An underpayment of VAT of c£125,000 which placed an immediate cash flow pressure on the company.

This was uncovered when the company had a VAT Inspection.  An arrangement to pay back HMRC at £1,000 per week fell into arrears when the company experienced a downturn in trade.

The board identified this in October 2010 and took immediate action to try and deal with the resultant cashflow pressures.

Leased Premises

• The company operates from leased premises, there were no arrears. At the time there was 7 years remaining on the lease

Employees:

• The CVA meant that 6 jobs were saved with no redundancies.

Bank & Financial facilities

• The company had no loan or overdraft facility and the bank held no security
• The directors had provided no personal guarantees

Directors

• Directors’ loans of c£55K had been made available to the company and were therefore connected creditors.
• One of the directors had been involved with 2 previous insolvencies

Unsecured Creditor debt:

•  £140K of which HMRC was 94%

A winding up petition which had been presented at court in January 2011 was served on the company by HMRC in late January 2011. Hearing date was scheduled for early March 2011.

However, the nominees review had already taken place in January.

The CVA was filed at court on 1st February 2011 and subsequently distributed to all creditors. An e-mail was received on 4th February from the HMRC Voluntary Arrangement Service stating they had requested the Winding Up Petition not to be advertised.

The CVA was approved at the creditors meeting in late February 2011 with a proposed dividend of 56p in £1. The winding up petition was dismissed at the return date.

Here the CVA was powerful enough to stop a winding up petition against the company.