Print Company Suffering From Downturn In The Market

The Challenge

A company with a turnover of approximately £700,000 in 2015 faced significant financial difficulties due to a combination of a market downturn and high staff overheads. These issues led to a severe reduction in revenue and the accumulation of debt. The company had a secured bank and factoring facility, but its unsecured debt amounted to £121,000. A major concern was that 45% of this debt was owed to HMRC, whose vote was crucial for any restructuring proposal. The company also had a loss-making arm that was a major financial drain, and a former director had provided an indemnity to the bank, adding another layer of complexity to the situation.

The Solution

The director contacted KSA, who was appointed in November 2015 to assist with a **Company Voluntary Arrangement (CVA)**. The CVA was designed to be a comprehensive solution to the company’s problems. A key part of the plan was to close a loss-making arm of the business, which required making five redundancies. A CVA is a perfect vehicle for this, as it allows for redundancies without the company incurring the high costs, as the employees can claim their payments from the Redundancy Payments Office. The CVA proposal offered a repayment of 41 pence in the £1 to unsecured creditors over five years. The plan was designed to provide a better return to creditors than a liquidation while also providing the company with the financial breathing room it needed to restructure and return to profitability.

The Results

The CVA was successfully accepted by the body of creditors. HMRC, which held a significant proportion of the unsecured debt, approved the proposal, ensuring its passage. The CVA’s approval provided the company with a legal and structured framework to manage its debt and address its operational inefficiencies. By closing the loss-making arm of the business and making necessary redundancies, the company was able to reduce its overheads and stabilize its finances. The CVA saved 10 jobs and provided a clear path to recovery, demonstrating how a CVA can be a powerful and effective tool for a company to deal with a downturn, restructure, and secure its future.