Software Designer Company Exits CVA Early

The Challenge

A software design company was severe financial difficulties. The problems were a combination of lower-than-forecast sales, high overheads, and a substantial but incomplete investment in a new CRM program. The situation was compounded by bad debts from insolvent clients and several incomplete projects. The company’s debt was substantial, with an unsecured total of £383,261, of which HMRC was the vast majority creditor at approximately 95% (owing £362,926). The directors had also provided personal guarantees for a bank overdraft and an EFG loan.

The Solution

The company engaged RMT KSA to assist with a Company Voluntary Arrangement (CVA). The CVA was designed to restructure the company’s unsecured debt, providing a path for the business to continue trading.

The Results

Initially, HMRC rejected the CVA proposal on January 3, 2012, but after further negotiation, they reversed their decision and approved it with standard modifications just nine days later on January 12. The CVA proposed a 40p in the pound dividend to unsecured creditors. The CVA successfully saved 16 jobs without any redundancies.

Just over a year later, the directors proposed a one-off payment in full and final settlement of the CVA. This was accepted by HMRC on February 8, 2013, and fully accepted by the other creditors on February 25, 2013. The company was able to exit its CVA early and get its finances back on track.