Finance and Professional

Case Study 1 – Group of accounting firms hit by market conditions

The Challenge

A group of professional accountancy firms, acquired under a “buy and build” strategy, faced a complex and severe financial crisis. The group, referred to as ASPL for this study, was burdened by trading losses and a rapid increase in HMRC liabilities. A time-to-pay (TTP) plan was secured with HMRC, but the directors failed to implement the necessary structural changes, causing the TTP to fail. To address the situation, a CVA was approved to restructure debts and make 18 redundancies. However, a “hived-up” company within the group (APSL2) still had to service a £1.78 million secured overdraft from Clydesdale Bank. The bank wanted to accelerate the loan repayments, which was unaffordable. By 2023, the pressure became too great, with APSL2 facing a £1.1 million loan to service, HMRC threatening a winding-up petition for £200,000 in tax debts, and a London landlord starting forfeiture proceedings for nine months of rent arrears.

The Solution

In 2021, RMT was brought in to negotiate with the bank, successfully converting the unaffordable overdraft into a long-term loan with manageable repayments, a key step taken outside of a formal insolvency process. When the financial pressure became too great in 2023, and with the business no longer viable, the board appointed RMT’s insolvency practitioners to act as proposed administrators. A pre-pack administration marketing process was undertaken, and after four weeks, a sale of the business to the group was agreed. This was a complex process that involved working with the Pre-Pack Pool and an evaluator to ensure the deal was fair and transparent. The pre-pack administration was the final tool used to save the business and its jobs after other methods had been exhausted.

The Results

The pre-pack administration was a success, saving 38 jobs that were transferred to the parent company. The business’s assets were sold to the parent company, allowing the group to continue trading and ultimately recover. Although the bank and HMRC received a small recovery from the pre-pack administration, the overall outcome was to protect a larger number of jobs and a business that would have otherwise gone into liquidation. This case highlights RMT’s flexible approach to turnaround and restructuring, using a combination of techniques over a four-year period TTPs, solvent debt restructuring, a CVA, and ultimately a pre-pack administration to preserve over 250 jobs across the group. It demonstrates the value of exploring all options, from consensual workouts to formal insolvency processes, to save a distressed business.

Case Study 2 Chartered Surveyor Firm Facing Severe Working Capital Shortage

The Challenge

A chartered surveying firm in England was experiencing a period of rapid growth, having doubled its size in just three years. While this growth led to a full order book, it also created a severe working capital shortage, forcing the company to take on increased borrowings. The situation escalated to the point where the business was facing significant HMRC tax arrears and had multiple loans from alternative finance lenders. The directors’ primary goal was to avoid a formal insolvency process.

The Solution

The firm engaged RMT to address the crisis. RMT’s team took a multi-pronged approach, first by leading negotiations with the three different lenders and HMRC. At the same time, they worked closely with the directors to prepare a comprehensive business plan and detailed financial forecasts to present to the creditors, demonstrating the company’s future viability and potential for success.

The Results

The strategic negotiations and detailed financial planning led to a positive outcome for the company. The lenders agreed to extend loan terms by 12 to 24 months, providing much-needed breathing room. Furthermore, HMRC Debt Management approved a 30-month “Time to Pay” arrangement for the total of £475,000 in corporation tax, VAT, PAYE, and NIC liabilities, successfully preventing the need for a formal insolvency process and allowing the business to continue its growth trajectory.

Case Study 3 Holding CVA Used To Preserve Deferred Consideration And Repay Creditors In Full

The Challenge

An accountancy, tax and business services company had built up a long-established client base over many years. The founding director was an experienced chartered accountant who had previously worked at a major accountancy firm before setting up his own practice.

The business grew steadily, but the director later suffered serious health problems, including heart issues, major surgery and further periods of hospitalisation. During these absences, HMRC compliance deteriorated. VAT and PAYE matters were not dealt with properly, returns were missed and historic tax arrears began to build up.

The director later decided to sell the majority of the business, partly because of age and health concerns and partly because the practice needed new energy and day-to-day management. The core business and most of the company’s assets were sold to a team led by senior staff. However, the sale was structured with deferred consideration rather than a full upfront payment.

This meant that significant value remained due to the company, but it would be received over time. At the date of the CVA proposal, the deferred consideration still due was approximately £343,000. The company continued to trade in a much reduced form, retaining a small number of clients and some specialist consultancy work, but it did not have enough immediate cash to settle historic HMRC arrears and other creditors.

HMRC issued a winding-up petition, creating a serious risk that the company could be pushed into compulsory liquidation before the deferred consideration was fully collected. This would have risked destroying or reducing value that could otherwise be used to repay creditors.

The Solution

RMT was instructed to advise on the company’s options. A Company Voluntary Arrangement was proposed as a holding CVA. The aim was not simply to rescue a trading business in the usual way, but to create a controlled structure that allowed time for the deferred consideration to be collected and paid to creditors.

The CVA was funded by monthly contributions from the deferred consideration and reduced ongoing trading, together with a one-off contribution of £130,000 from the director, raised through the remortgaging of a personally owned commercial property. The director also agreed to take only a modest salary to keep overheads to a minimum.

The CVA was designed to pay creditors in full over three years. HMRC, as a secondary preferential creditor, was forecast to receive 100p in the £, and unsecured creditors were also forecast to receive 100p in the £.

This case demonstrates how a CVA can be used creatively where value is tied up in deferred consideration. Rather than allowing a winding-up petition to force a premature liquidation, the CVA created a structured route to preserve value, collect future payments and repay creditors in full.