Case Studies

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.

Company Directors approached Debtfocus to look at the company position following creditor pressure, with debts in excess of £600,000.

After analysing the trading position it was clear that a CVA wasn’t viable as the company was only just breaking even. Accordingly, Debtfocus arranged for independent Surveyors to provide a valuation of the company assets on a going concern and break up basis {by Auction}. The directors expressed an interest in buying the company assets as they fancied giving the business another go with smaller premises and a smaller workforce.

The directors were very worried about the recent bad press concerning pre-packaged administrations however Debtfocus have a wealth of experience in handling such cases and the main route to a successful pre-pack is to get professional advice from the start from a Licensed Insolvency Practitioner.

IVA CASE STUDY 1

John & Susan Jones have two children and live in their own home that they purchased two years ago. They estimate that its current value is around £175,000 and they have a mortgage with their bank for £155,000.

They began to experience financial difficulties when John’s employers stopped overtime, which made a drastic reduction in his monthly salary. As a result of the fall in income, the family relied more on unsecured credit and their borrowing levels rose very quickly to a point where the total outstanding amount on credit cards and loans was £34,000, costing the Jones’s £815 per month.

John & Susan contacted Debtfocus for help with their situation and following a free consultation with one of our advisors it was clear to see that after allowing for the family’s priority living expenses, the amount of £815 each month was unaffordable

Peter, a director of a small building company approached Debtfocus with debts in excess of £170,000 mainly to HM Revenue and Customs. He had built up his company over a period of 5 years but the recent recession had hit hard and he was unable to maintain his payments to supplies and in particular the Corporation Tax/ VAT and PAYE that was due.

Peter now finds that he is unable to continue to support the company from his own funds and there are no funds left to pay the employees who were expecting payment the day after. Furthermore, bailiffs are knocking on the door demanding payments.

After an initial consultation with Debtfocus, it was evident that the company could not continue to trade at even a break-even point.