Oil and Gas Sector Services Company Faced A Winding Up Petition

The Challenge

A long-established company with a 30-year history and £3 million in sales faced a sudden and severe financial crisis. Following a poor year in 2003, the business suffered a devastating blow in 2004 when it lost its largest customer, resulting in a **£286,000 bad debt**. This event crippled the company’s cash flow, and despite being well-managed with excellent financial reporting, the managing director was advised to close the business and walk away. He was determined to avoid this outcome, wanting to honor his 30 years of trading and not let down his employees, creditors, or bank. The company was in a race against time, needing a radical solution to restructure and recover while also dealing with the immediate threat of creditors.

The Solution

The company, with expert guidance from KSA, decided on a bold strategy: a Company Voluntary Arrangement (CVA). They believed an honest approach to creditors would be well-received. However, before the CVA proposal could be approved, a single creditor who was also a competitor filed a winding up petition in the Edinburgh Sheriff Court, aiming to force the company into liquidation. KSA immediately took action, appointing legal representation to challenge the petition. They argued that it was not equitable for a single creditor to decide the company’s fate when the law provides a process for the entire body of creditors to make that decision. This was a critical and legally sound maneuver, as it prioritized the collective interest of all creditors over the actions of one.

The Results

The legal strategy was a resounding success. The Sheriff agreed with the argument, rescinding the winding up petition and allowing the CVA process to proceed. This was a landmark victory in Scotland, as it affirmed the power of a CVA to defeat a winding up petition. Two weeks later, the CVA was officially approved by the creditors. With the CVA in place, KSA helped the managing director restructure the company and introduce new financial products. The company’s bank, Royal Bank of Scotland, was highly supportive. By 2007, less than three years after the crisis, the company had nearly **doubled in size**, a multinational company had acquired a stake, and the CVA had been paid off three years early. The bank’s debt was fully repaid, and the business expanded to two sites. The CVA not only saved the company but also enabled it to thrive, proving that with the right advice, a business can overcome even the most severe challenges.