Midlands Based Care Company With Poor Financial Management

The Challenge

A healthcare provider specializing in at-home and palliative care, with a turnover of £1.1 million, was experiencing significant financial difficulties despite recent growth. The company’s problems stemmed from a combination of poor financial management, the managing director’s prolonged illness, and the inherent complexity of rapidly scaling the business. A major contributing factor was a large, £200,000 debt owed by a connected company, which put a strain on cash flow. With an unsecured debt of £184,000, all of which was owed to HMRC, the company faced an immediate threat of liquidation. HMRC served a winding up petition in late May 2014, with a hearing scheduled for the end of June, placing the business in a race against time.

The Solution

The company hired KSA in May 2014 to explore a solution, leading to the rapid production of a CVA (Company Voluntary Arrangement) proposal. The CVA, which offered an initial dividend of 77 pence in the £1, was filed with the court and distributed to creditors. A key component of the proposal was a provision that once the connected company repaid its £200,000 debt, those funds would be used to provide a full, 100% repayment to creditors. Although HMRC initially rejected the proposal, the court granted a three-week adjournment on the winding up hearing, giving the company a short window to find a new solution. At the adjourned creditors’ meeting, the director chose a new, direct approach: he would settle the debt with HMRC in full, outside of the CVA.

The Results

The decision to directly pay HMRC the full amount proved to be a successful strategy. The £184,000 debt was settled in full before the final adjourned winding up hearing date. As a result, the winding up petition was dismissed by the court. The company avoided liquidation, and 81 jobs were saved with no redundancies. This case highlights a unique outcome where the threat of a CVA and winding up petition forced a decisive action that ultimately led to the full repayment of the debt. It demonstrated that even when a CVA is rejected or abandoned, the process can serve as a powerful catalyst for a successful resolution, preserving the business and jobs.