Media, Creative and Marketing

Case Study 1 Edinburgh Print and Design Company Suffered Bad Debts

The Challenge

A family-owned design and print company, with a turnover of approximately £1 million, was facing a serious crisis. The business, despite being fundamentally viable, was insolvent due to two major bad debts and the loss of a key customer. The managing director’s forecasts showed that the company was on the verge of running out of cash. While the company was actively seeking a solution, one angry paper supplier began threatening legal action. This supplier, despite a legal caveat being lodged, managed to file a winding-up petition and, through a little-known rule (Section 135 Insolvency Act 1986), successfully applied for a provisional liquidator. This resulted in three people with a court order taking immediate control of the company, effectively accusing the directors of being “crooks” and threatening to kill the business. The directors were under immense pressure, with a court-appointed liquidator in their building and a winding-up petition against them.

The Solution

The company, having already appointed RMT, acted immediately. Using their deep knowledge of case law, we devised a legal strategy to fight the provisional liquidation and the winding-up petition. Within just three days, we produced a comprehensive 60-page Company Voluntary Arrangement (CVA) document to present to the court as a viable alternative to liquidation. They brought in a barrister who went to court to seek an order to remove the liquidator. KSA also maintained a crucial dialogue with the company’s bank, Royal Bank of Scotland, which, despite the high risk, continued to support the company and the rescue plan. This allowed the company to regain control and move forward with the CVA proposal. The plan included freezing £200,000 in debts to suppliers and HMRC, restructuring staff to cut costs by 23%, and implementing a new marketing plan to diversify its client base.

The Results

The legal strategy was a complete success. After several days and a significant cost, the court removed the liquidator and the winding-up petition was defeated. With the immediate threat removed, the company was able to call a creditors’ meeting. Despite the petitioning creditor hiring a local insolvency practitioner to argue against the CVA, the proposal was approved. The CVA provided a legal framework that allowed the company to survive, even with the liquidator taking out over £15,000 in fees.

Since the CVA was approved, the company has made profits well in excess of its initial forecasts, and the director’s foresight and honesty paid off. This case is a powerful example of how a CVA can be used to defeat a winding-up petition and provisional liquidation, proving that it is not equitable for a single creditor to end a viable business. It also highlights the importance of having expert legal and financial advisors who can use the law to protect a company, giving it the chance it needs to succeed. The company continues to thrive and still receives ongoing guidance from us.

Case Study 2  Marketing Agency Hit By Fraud

The Challenge

A high-end advertising and marketing company with a turnover of approximately £1.4 million faced a severe and urgent cash flow crisis, not from a typical market downturn, but from a devastating fraud. Over a period of 9-10 months, an estimated £340,000 was stolen from the company. This fraud led to the accumulation of large liabilities, particularly with HMRC. The board identified this critical situation, recognizing that without immediate action, the company was in danger of collapse. The company had a total unsecured debt of £430,000, of which a significant 80% was owed to HMRC. The directors, who were not at personal risk due to a lack of personal guarantees, were under immense pressure to find a way to manage the debt and save the business.

The Solution

Referred by a former client, the company’s director contacted RMT, and the firm was appointed  to assist with a Company Voluntary Arrangement (CVA). The CVA was chosen as the most suitable legal mechanism to restructure the company’s finances and deal with the fallout from the fraud. The first order of business was to identify the fraudulent transactions and rebuild the corrupted systems to prevent a recurrence. RMT also assisted the company in taking decisive actions to reduce overheads. A key part of the restructuring plan was to close a foreign office and use the CVA to legally terminate its lease, which was a strategic and cost-saving move. The CVA proposal offered to repay 34p in the £1 to unsecured creditors over five years, a plan designed to be acceptable to creditors while providing the company with the financial breathing room it needed to recover.

The Results

The CVA was successfully accepted by the body of creditors. HMRC, which was the largest unsecured creditor, approved the proposal, a critical step that assured its passage. The CVA’s approval provided a formal and legally binding framework for the company’s recovery. The company successfully closed its foreign office and, by using the CVA, was able to cancel the lease without a problem. The restructuring and the implementation of the CVA also meant that 16 jobs were saved, as the company only had to make one redundancy. By addressing the massive debt caused by the fraud and implementing new controls, the company was able to move forward on a solid financial footing. This case demonstrates the power of a CVA not only in dealing with traditional debt but also in providing a pathway to recovery after a significant and unexpected financial event like fraud.