The secretary of a telecoms company contacted Keith Steven of KSA to discuss the company’s financial situation. A meeting was then requested and held at KSA’s London office. The business provides installation and maintenance of telecoms systems.
KSA were appointed to assist with a Company Voluntary Arrangement (CVA) in December 2010. Turnover for the year to June 2010, was c£285K.
The company was encountering financial difficulties due to:
- fixed costs too high
- Mobile engineers/ installers having to be paid even if they are not working. The bad weather at that time highlighted the issue.
Premises
- The company operates from two leased premises based in the same town; one of which is the retail premises and the other the admin office. The premises a leased on a monthly basis and subject to one month notice.
Employees:
- The company employs 5 staff including the director and company secretary
- During the CVA process KSA assisted the director with 1 redundancy.
Bank & Financial facilities
- The bank holds a fixed and floating charge and is therefore classed as a secured creditor and as such would continue to be paid outside the CVA mechanism.
- The bank provides a partial factoring facility and credit card.
- The company has no overdraft facility.
Director
- The director had provided no Personal Guarantees (P.G’s) to any creditor 4
- The director was owed c£6.5K in respect of loans made available to the company and was therefore a connected (associate) creditor. It is usual that connected creditors are required to waive their claim to monies owed and that debt does not survive the CVA
Unsecured Creditor debt:
- £160K of which HMRC was 94%
Cost & overhead reduction:
- An independent management accountant was appointed to increase the regularity and quality of the company’s future financial reporting.
- Staff consulted to agree changes to their employment terms and conditions.
- The cost reduction in this area included one redundancy with a resolution to utilise sub contractor engineers at busy periods.
- Strict control and monitoring of the use of company vehicles were implemented to reduce fuel and maintenance costs.
- Additionally due to the redundancy already described above and the more efficient use of company vehicles it was found that one vehicle was surplus to requirements and the lease was terminated using the CVA.
- The director has resolved to terminate the lease for the administration premises.
- The director has reviewed the company’s overall pricing policy which alongside the cost reductions should create an increase in the overall margin.
The nominee’s review was held and the CVA and nominee’s report were subsequently lodged at court. The CVA proposed 46p in £1 repayment to unsecured creditors over 5 years.
HMRC provided their response accepting the CVA. The CVA was accepted by the body of creditors at the creditors meeting in July 2011.
Towards the end of 2014, KSA received notification that the company had been placed into CVL (Creditors Voluntary Liquidation) until that point the company had adhered to the conditions and contributions detailed in the CVA.
