Recruitment Company Supporting Associated Company Led To Difficulties

The Challenge

A recruitment company with a turnover of £467k faced severe financial difficulties. The company’s problems stemmed from several sources: a fall in sales, providing financial support to an associated company that had since ceased trading, and the sale of its premises at a £100k loss. The company was under immense pressure, with HMRC threatening a winding-up petition for a total unsecured debt of £105k, all of which was owed to them.

The Solution

The company’s senior manager engaged RMT KSA in February 2013 to assist with a Company Voluntary Arrangement (CVA). A new invoice finance provider was introduced, to secure the necessary funding for the company to operate during the CVA process. The CVA proposal offered to repay a dividend of 50p in the pound to the company’s sole unsecured creditor, HMRC.

The Results

The CVA was a success. HMRC approved the proposal with standard modifications on October 8, 2013, and the CVA was formally approved at the creditors’ meeting the following day. This outcome provided a structured solution to the company’s debt issues and, most importantly, saved 42 jobs. The company was able to defeat the winding-up petition and continue trading under a manageable repayment plan.