Proposal to Creditors for Company 1
The company specialised in supply chain management and project management software and support.
The CVA was based on the Company hiving down its business into a new company, which would then pay the CVA for the business under the mechanisms set out in the proposal.
The sale of the business was carried out via a CVA rather than the more typical route of an administration due to the confidentiality requirements of the Company’s main contract. This need for confidentiality would have precluded the advertising and open marketing of the business prior to the sale.
In addition the company had a disputed liability to a former director with an estimated maximum value of £250,000 was disclosed in the directors’ estimated statement of affairs. The former director had also filed a claim for unfair dismissal against the company in relation to the termination of his employment. Any such claim, if proved, would be an unsecured claim against the company and therefore included in the unsecured claims in the CVA.
The consideration payable to the CVA in respect of the sale of the business fell into the following categories:
Cash and Loan Notes A cash payment of £xxxxx was fixed of which £xxx was payable immediately with the remainder falling due by way of four quarterly instalments of £xxxx. Interest of base +3% way payable on the deferred elements.
Preference Shares Cumulative redeemable preference shares in the successor company totalling £60,000 were to be issued at 5% coupon. These were to be redeemed at the rate of £20,000 PA for 3 years with the coupons paid quarterly from a specified date.
Royalty Payments The Company had developed a new software product. The intellectual property rights to this project were to be transferred to the successor company for an initial licence fee which was payable immediately. Royalty payments of £x per software licence sold were then to be paid annually with the quantum of sales to be verified by an accountant’s report.
These sums received for the consideration formed the basis of the funds available for distribution to unsecured creditors.