One of the directors of this software development company contacted KSA director Wayne Harrison to discuss the company’s present financial situation. Then, after a subsequent telephone conversation with KSA regional manager Malcolm Gray, a meeting was requested and held at the company’s premises in May 2011.
KSA were appointed to assist the company with a Company Voluntary Arrangement (CVA) in late May 2011.
Turnover for the year to 31th March 2011, was c£684K whish was a 3% increase on previous year.
The company was encountering financial difficulties due to:
- Being undercapitalised due to rapid growth of business.
- Large borrowings including significant overdraft facility.
- Inability to adhere to time to pay (TTP) arrangements with HMRC
- The company operated from leased premises.
- The company employed 9 staff including the directors.
Bank & Financial facilities
- The company had a large flexible loan facility (c£140K) with its bank which was secured via a debenture.
- There was also a large overdraft facility (c£60K0 with another bank which was unsecured.
- The director’s had provided Personal Guarantees (P.G’s) to the unsecured bank.
- There were issues with very large overdrawn directors’ loan accounts (ODDLA’s) however these were repaid to the company by the directors prior to the CVA being filed at court.
Unsecured Creditor debt:
- £333K of which HMRC was 60%.
A Winding Up Petition was served by HMRC. On KSA’s recommendation, specialist legal representation was instructed by the company. The legal representation assited in obtaining an 8 week adjournment of the Winding up petition.
The nominee’s review was held and the CVA and nominee’s report were subsequently lodged at court. The CVA proposed 43p in £1 repayment to unsecured creditors over 5 years.
HMRC provided their responses rejecting the CVA, twice. KSA assisted the company to satisfy the concerns raised and the CVA was subsequently approved. The CVA creditors meeting was held and adjourned for two weeks while negotiations were held. The Winding up petition was subsequently dismissed at the return hearing date.
Whilst the company adhered to the CVA contributions as defined, the directors placed the company in administration in June 2014.
Categories: CVA, What is a CVA or Company voluntary arrangement?