If there is a short term problem with cash flow using expert turnaround and insolvency advisors can lead to short to medium term time to pay deals (TTP) that AVOID all the formal insolvency techniques such as CVA, administration, pre-pack administration, voluntary liquidation and compulsory liquidation.
Directors may have tried and failed to get help from unsecured creditors, HMRC may have refused a time to pay deal based on previous non compliance with TTP deals.
KSA Group can often achieve a deal because it has looked carefully at the insolvency options, it has considered and rejected a formal tool like administration and has set out a detailed statement of affairs but more importantly a detailed (credible) financial forecast.
Using the implied THREAT of a CVA or administration is also a powerful but informal option. Using the analysis of the company’s statements of affairs, forecasts and a determined advisor, the "Sword of Damocles" can be an important weapon.
In other words, we do the preparation work for (say) the CVA to set out an informal (no court involvement and no formal creditors meetings) deal to buy time and repay 100p in £1 over an agreed period.
This can be coupled with a deal with the bank to defer term loan repayments for example. The key is preparation and detailed analysis. We in effect put our reputation on the line for the client and set out the informal time to pay deal – we have in effect done the preparatory work for the less palatable insolvency alternative.
Thus questions from HMRC like "well what would we get if we wound the company up" are therefore easy to answer. "You will get 0p in £1"!
We would set out a plan like this
Plan “A” – Informal Time to Pay Arrangement (TTP) brokered by KSA Group
- KSA Group to prepare statement of affairs comparing winding up of the company or CVA option versus a full payment over 6-12 months
- No guarantee that HMRC will allow TTP and may still move to winding up
- New capital may be raised in the next few weeks. This may be used as lump sum or part repayment, with the balance retained for working capital
- KSA will lead negotiations for a capital repayment holiday with AXY Bank if required
Plan “B” - Company Voluntary Arrangement
- Contains creditor pressure, especially from HMRC
- Sharply improves cashflow
- KSA Group will prepare standalone Company Voluntary Arrangement that proposes to pay back 30-100p in £1 over say 24-60 months
- A detailed statement of affairs should be produced for the company by KSA Group
- Detailed financial forecast should be prepared using our bespoke CVA forecasting tool
- Usually no new banking facilities required
- Refocus the directors on completing the turnaround process and getting the business back to profitability
- Profits now being made but cashflow not sufficiently strong to meet HMRC payment terms
- Retain tax losses
- No directors conduct investigation in say liquidation
The benefits of this approach are that the board remains in control, there is no formal insolvency so fees are much lower, the business continues as normal. It is often just what the business needs to get back on its feet – time.
If the problem is more deeply rooted then the options may include voluntary liquidation, CVA, and administration.
If you have a client with stretched cashflow but a viable company we can give initial advice and our written report free of charge after an onsite and no obligation meeting.
Debt Restructuring - Professional Partnerships
This can be a very powerful option for professional partnerships. Call and talk to Keith Steven on the option.
If you have any questions on this option or would like a free copy of our Turnaround and Insolvency Professional Toolkit please call Robert Moore on 020 78770050 or call Keith Steven on 07974 086779.