Southern based sports retail and service company CVA case study

The director of the company contacted Sarah Massey of KSA to discuss the company’s present financial situation. Then, after a subsequent telephone conversation with KSA regional manager Hugh Gabriel a meeting was requested and held at the company’s premises

The company operates within a specialised leisure sports sector.

KSA were appointed to assist the company with a Company Voluntary Arrangement (CVA) in December 2014. Turnover in the filed accounts for 2013 was c£290K.

The company was encountering financial difficulties due to:

1. Undercapitalisation
2. Shortfalls in accounting and administration
3. A falling turnover.

The board identified these problems in late 2014. The director had commenced the updating of accounting and administration and then contacted KSA to try and deal with the cash flow pressures.

Premises- The company occupies combined retail and office unit on a business estate. The  unit is lease on monthly rolling contract

Employees:

• The company employs 1 member of staff; the director is not currently an employee of the company
• In this case KSA was not required to assist with any redundancies – although when necessary such assistance may be provided.

Bank & Financial facilities

• The company operates a current account with no overdraft facility which was maintained with a credit balance.
• The bank holds no security over the company’s assets.
• It was believed there were two outstanding business loans of c£11K of which one remained unconfirmed with no details provided.
• It was believed that the director had provided personal guarantees in respect of these loans; however, again only one was substantiated
• KSA was made aware of no outstanding finance agreements

Director

• It is believed that the directors and shareholders made loans of c£75K available to the company, although this remained unsubstantiated.
• The directors and shareholders would therefore be classed as connected creditors: It is a usual HMRC modification (condition of acceptance) that all connected creditors agree to waive there claim to any monies owed and that claim does not survive the CVA

Unsecured Creditor debt:

• £77K of which HMRC was 37.7%
• The company received several county court judgements in respect of the unsecured creditors.  These creditors were obviously significantly disgruntled and were unwilling to stop the judgements, therefore putting further pressure on the company’s fragile cash flow. The company was ultimately unable to meet the fees for the completion of the CVA.

In 2015 KSA resigned from assisting the company with a CVA due to lack of requested information supplied within the necessary timescale and due to concerns over the ultimate viability of the company.