KSA Group persuades HMRC to withdraw winding up petition and accept CVA
Case Study Telephone Answering Service
The company successfully operated a telephone answering service since January 1997. Turnover had grown from 39,000 to 2 million per annum and it traded with a profit in all years of trading apart from 2008. It fell into financial difficulties in 2008 due to a combination of unforeseen circumstances, such as losing key members of staff in financial control, experiencing a significant increase in bad debts, and the value of the Sterling falling against the American dollar.
HMRC was owed 700k and had issued a winding up petition, although it had not been advertised. It was at this point they contacted us. Better late than never! We advised that a CVA was a viable option as long as some major changes to the business were made. KSA immediately set about putting the proposal together. We advised the board to do the following and provided support where necessary.
•The redundancy of the sales manager, the entire marketing department and the call centre manager.
•A full appraisal of the entire workforce with a view to keeping those that are committed to the company and its direction.
•The MD taking full day to day control of sales and marketing.
•The appointment of a new Financial Controller.
•The implementation of weekly staff cost reports, daily profitability reports and a freeze on all capital expenditure.
•The cancellation or non-renewal of certain contracts.
•The appointment of two call centre team managers, a lesser paid position reporting directly to the MD and targeted on reducing costs and maximising productivity.
•A major drive to reign in bad debts. ( caused in part due to loss of financial control staff )
•A reduction in the overall companys overheads.
•A targeted sales drive
The CVA highlighted the determination of the board to push through change and proposed to pay unsecured creditors 72p in the pound over 5 years.
Meanwhile, Annette Breakspear, our corporate advisor, set about tackling the problem of the HMRC winding up petition. It was KSAs view that given the company had some 1m of unsecured creditors a CVA was a better outcome than liquidation which would happen if the petition was allowed. As such, Annette, along with the solicitors, sought an adjournment to allow the actual debt to HMRC to be established (HMRCs petition was inaccurate) and give KSA time to prepare the CVA. The court agreed and the date of the hearing was adjourned. In the interim CVA filed and meeting of creditor scheduled. At the new hearing the petition was dismissed,However, in the interim HMRC had sent proxy accepting the proposal of the CVA.
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We will arrange a free meeting at either our or your offices to discuss ALL options, including the CVA options described above