Hertfordshire Recruitment Company Suffering From Social Care Cutbacks

The Challenge

A Hertfordshire-based recruitment company, specializing in temporary placements in the health and social care sector, faced significant financial difficulties. The company’s primary struggle stemmed from local government cutbacks, which severely reduced its profit margins. This was compounded by a large historical debt to HMRC. Although the company had an informal short-term arrangement to repay HMRC £5,000 per week, this was placing an enormous and unsustainable strain on its cash flow. The financial situation was further exacerbated by local authorities delaying payments to the company. With HMRC debts of approximately **£220,000**, a bank overdraft of **£25,000**, and mounting creditor pressure, the business was at risk of collapse.

The Solution

In February 2016, the director met with a KSA regional manager to discuss all available options. Within 48 hours, KSA provided a detailed report recommending a Company Voluntary Arrangement (CVA). The CVA was proposed as a solution that would offer creditors a sensible and affordable monthly repayment, at a level the company could comfortably manage over an extended period. The KSA team took over all creditor liaison, working closely with the director to create prudent financial forecasts that demonstrated the business’s viability and its ability to repay creditors. The plan aimed to offer a minimum dividend of **40 pence in the £1**. During the CVA proposal period, the company also actively pursued cost-cutting exercises and worked hard to expand its customer base to improve its future profitability.

The Results

The CVA proposal was successfully accepted by creditors, and the company formally entered the **five-year Company Voluntary Arrangement**. The CVA provided a legally binding framework that allowed the company to manage its debt in a structured way. This successful outcome was crucial as it protected the jobs within the company and secured the future of the business. By offering a realistic and manageable repayment plan, the CVA enabled the company to navigate its financial crisis, continue its operations, and focus on expanding its client base. This case highlights how a CVA can be a powerful tool for a business with cash flow issues, providing a path to recovery and stability by creating a formal, manageable repayment plan that benefits all parties involved.