The director of an IT consultancy company contacted Robert Moore of KSA to discuss the company’s present financial situation. A meeting was requested and held with KSA regional manager Amanda Eckersley.
KSA were appointed to assist the company with a Company Voluntary Arrangement (CVA) in November 2014. Turnover for 2014 was c£135K.
The company was encountering financial difficulties due to:
- Cashflow issues resulting from carrying large historic debt.
- Poor business
- The company employed 2 staff including the director.
Bank & Financial facilities
- The bank is unsecured and provides no overdraft or loan facility
- The director(s) had provided no Personal Guarantees (PGs) to a any creditor.
- There was a large overdrawn director’s loan account.
Unsecured Creditor debt:
- Unsecured creditors were owed c£165K of which HMRC was the majority creditor.
A Winding Up Petition was served by HMRC which, on receipt of the court filed CVA, the HMRC Voluntary Arrangement Service (CVAS) agreed not to advertise the Winding Up Petition while to proposals were considered. Since a Winding Up Petition can not be advertised less than 7 days before the court hearing date, it was then necessary to adjourn the hearing.
The nominee’s review was held and the CVA and nominee’s report were subsequently lodged at court. The CVA proposed 93p in £1 repayment to unsecured creditors over 5 years.
HMRC provided their response rejecting the CVA. after subsequent request for reconsideration the rejection was up held by HMRC. The CVA was therefore rejected at the creditors Meeting and the company will be ordered to be wound up at the adjourned petition court hearing date.
Despite the proposed high dividend, It is likely the CVA proposals were rejected because of the historic debt owed by the company.