Winding Up Petition Case Study – Health Drink Retailer

KSA Group persuades ex landlord to withdraw winding up petition and accept CVA

We were approached by a company that had a number of outlets selling juices, smoothies and similar health drinks. The company had a turnover of £1.2m and employed 40 people.
However, they fell into difficulties as a result of a fall in discretionary spending in the shopping centres at which they were located. In addition, a large amount of management time was taken up trying to develop a franchise operation around the world. This was beginning to reap dividends but in the meantime the company was unable to pay its debts.

The company had trade creditors of £208k, HMRC was owed £89k for PAYE and NIC, the company had been on a time to pay deal but could not keep up with the payments. Other loans were in the order of £900k. However assets had a book value in excess of £1m.

The company failed one of the three insolvency tests under s123 Insolvency Act 1986. It had no outstanding legal actions. It has a solvent balance sheet BUT the company could not pay its debts as and when they fell due.

KSA Group advised that a company voluntary arrangement be entered into that would propose initial repayments to the creditors (via payments to the CVA trust account) of c.£2-3,000 per month in year 1 and stepping these contributions up to say 50% of net retained profits over the remaining term of the voluntary arrangement.

As part of the CVA KSA Groupadvised that 5 units were to be closed and efforts were to continue to refinance the business in order to exit the CVA.

Marie Moody of KSA Group set about putting the CVA in place by negotiating with landlords to reduce the rents and pay the arrears off over time. Marie also persuaded the council to hold off on liability orders for the rates. However, one of the landlords, of a closed premises, served a winding up petition. Marie and her team then persuaded the petitioner to hold off action until the outcome of the CVA was known.

When the CVA was filed the petitioner voted for the proposal which gave a total dividend of 25p in the pound, with the option of more – should the business make more profits. In the end 40 jobs were saved and the business continues to trade at the reduced number of shops.

Call KSA on 0800 9700539 and talk to the experts.

We will arrange a free meeting at either our or your offices to discuss ALL options, including the CVA options described above