CVA Case Study – Software Company
This company produced software programmes for the education sector and had traded for 6 years. Although trading was good for much of this period, the company had recently entered into a contract to supply local schools with its new software product and if this trial was successful they would look to offer the product nationwide. The directors of the company felt that the new product could be extremely profitable but it had taken their eye away from the main core of the business resulting in a reduced turnover.
The product had taken longer than expected to develop and the increased cost involved now meant the company was experiencing cash flow problems, leading to a build up of debt. The company had debts of £70,000 to HMRC. The company also had 10 other creditors who it owed another £40,000 in total. This made £110,000 worth of debt that required paying immediately.
Debtfocus carried out an assessment of the business and advised the best way forward for the company was a CVA. Management restructure meant that the directors concentrated on the core products at the same time as developing the new software product. After successful negotiation with creditors by Debtfocus, a CVA was approved for the company which provided for monthly payments of £1,000 for 60 months with all costs included and the balance of the debt written off.
With the CVA in place the pressure on the company was removed and they were able to complete a successful trial of the new product and then begin to work on national distribution. The company maintained its monthly contributions, traded profitably and was even able to bring the arrangement to an early conclusion by making a final lump sum payment into the arrangement within 2 years of the start of the CVA.
CVA Case Study – Transport Company
This company provided haulage services to the oil industry and had grown at a great pace in the first 3 years of trading, but unfortunately the fast growth had not been underpinned by enough capital. The company lost a big customer and the effect on cashflow meant that VAT and PAYE could not be paid; a winding up petition was then issued against the company.
Debtfocus quickly got the petition suspended and carried out a full assessment review of the company with the help of its directors and accountant. It was clear that if the current debt could be addressed than the company had a viable and positive future therefore Debtfocus recommended that a CVA be proposed to the creditors.
Debtfocus negotiated with HMRC and other creditors on the companies behalf and a CVA was approved for the company which provided for creditors to receive a dividend of around 25p in the £ after costs, which creditors accepted as this would save jobs and provide a better return than Liquidation.
The CVA has now been in place for three years and the company has met each affordable monthly contribution enabling jobs to be saved and a viable company to continue.
