London Restaurant is liquidated following attempt at CVA

15 November 2013

The company traded as a restaurant and pastry/coffee shop. KSA were appointed to assist the company with the production of CVA proposals on 11th July 2011. Turnover to 30th June 2010 was £1.2m a £55k increase on previous year.

The company encountered financial difficulties due to a number of issues:


Initially:
• Cost of renovation of large leased premises doubled to £700k
• Opening delayed 4 months due to increased works
• Opening was low key due to renovation overspend therefore trade was slow in building.


Ongoing:
• Rising overheads: Business rates, Rent, utilities etc.
• Cash flow difficulties directly attributed to initial renovation problems had caused the business to rely heavily on arranged overdraft.
• 2nd quarter 2011 saw a dramatic drop in sales of 60k. Much of this was attributed to the extended holiday period around the Royal Wedding, Easter and the May Bank holiday
• Unable to adhere TTP arranged with HMRC

The creditors were;

• The bank was secured with Debenture (Fixed and Floating charge) and mortgage.
• Owed £53k on £400k overdraft facility
• £234k owed on 2 bank loans original cumulative facility of £310k
• £47.5k remaining on 1 EFG loan original facility of £60k
• £3k remaining on 1 SFLGS loan original facility of £60k
• The directors provided personal guarantees and security by way of personal property for any outstanding amounts.

Unsecured creditors

Total debt of £318,771 inc. HMRC at £216,186 (c.68%)

HMRC approved the CVA with standard modifications on 5th December 2011. 

A CVA creditors meeting was held in London in December 2011. And although sufficient votes had been cast by the creditors to approve the CVA with a proposed Dividend 49p in £1, certain matters were disclosed at the meeting which gave cause for concern over the company's future viability. It was then agreed to adjourn the meeting for 14 days.

At the adjourned meeting on 3rd January, the chairman informed the meeting that the directors had confirmed the company was no longer viable and the CVA was rejected.

KSA Group was appointed as liquidators on 8th February 2012.

OK, so that sounds like a bad result but one of the co-owners had been working 16 hours a day on a low wage as the head chef. Almost immediately after the liquidation he secured a job advising high-end hotels on their food and menus which paid significantly more!

So in the end the most important thing to do is to act decisively and tell the truth, as otherwise the risks go up significantly.

Categories: Liquidation