CVA Case Study

Business Update Insolvency

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This is an example of a situation where Gibson Hewitt has saved a business and retained employment whilst offering a greater return to all creditors.

Our client came to us as the company was unable to pay wages to its 40+ employees.   All company debts were factored but the company had experienced a large bad debt.   This debt had been disapproved and as a result the invoice discounting company would not advance any further funds.   In addition HMRC had informed the company they were issuing a petition for the winding up of the company as PAYE and VAT were outstanding.   Liquidation seemed the only route.

Immediately we spoke to HMRC agreeing a stay on issuing the petition whilst we assessed the position.  We liaised with the factoring company.  We reviewed the viability of the business by looking at the financial accounts and discussions with the company’s accountants.

As a result of our discussions and actions we were of the opinion that the underlying business was viable and suggested a company voluntary arrangement (CVA) might be the better way forward as the business would continue to trade securing employment for all employees.   This would also give a better return to all creditors than if the company ceased trading immediately as would be the position if the petition was issued.

The CVA proposal offered the creditors payment from future profits plus any return from the bad debt which was being litigated by the factoring company.

Surely all stakeholders will benefit.

Ring Lynn Gibson 01932 336149 for advice and action.