Management Consultant LLP Hit By Losing Court Case

The Challenge

A Limited Liability Partnership (LLP) operating as a consultancy faced severe financial distress despite a 2015 turnover of around £270,000. The company’s problems were a result of a combination of factors, including a costly and time-consuming **litigation action** that was eventually settled. This issue, along with **inefficient daily operations** and a failed investment offer, led to severe cash flow issues. The LLP was also falling behind on its HMRC submissions. With total unsecured debt of £150,000, of which a significant 67% was owed to HMRC, the business was under immense pressure. The designated members also had personal guarantees on a loan facility, putting them at personal risk.

The Solution

An associate of the LLP contacted KSA, who was appointed to assist with a Company Voluntary Arrangement (CVA). Prior to KSA’s involvement, the LLP had already proactively taken steps to reduce overheads by cutting payroll to the bare minimum and reviewing all other costs. The CVA proposal was a formal plan to manage the debt and restructure the business. It proposed a repayment of 59 pence in the £1 to unsecured creditors over a five-year period. The LLP also decided to implement a new SEO and digital marketing strategy to boost its business activity and ensure long-term viability. The CVA was the formal mechanism to consolidate the company’s financial recovery efforts and gain the support of its creditors.

The Results

The CVA was a complete success. HMRC, which held the majority of the unsecured debt, reviewed and accepted the CVA proposal. Subsequently, the CVA was approved by the entire body of creditors at a meeting, and the LLP formally entered the arrangement. This outcome was crucial, as it allowed the LLP to continue its operations from its leased town center office and, most importantly, all 2 staff were saved, with no redundancies necessary. The CVA provided a structured, legal framework for the LLP to manage its debt, allowing it to focus on its new marketing strategy and return to profitability. It demonstrated how a CVA can be a viable and powerful solution for professional service firms to overcome significant financial hurdles and secure their future.