Having to consider putting your company into Creditors’ Voluntary Liquidation (or CVL) is not something any Director sets out to have to do…
Key Business Information
- Turnover £600,000
- Trading for approximately 25 years
- General supplier arrears and cash flow problems
- Expensive long terms leases impacting profitability
How We Helped
After more than 20 years in business, this company had begun to see its turnover decrease slowly year on year as customers began to look to make cost savings. This decline in turnover steadily took its toll on cash flow, initially depleting cash reserves and then creating increasing supplier arrears. This problem was compounded when the bank decided to begin to reduce the company’s overdraft facility each month as the banking industry became more risk averse.
Knowing the company’s turnover was unlikely to recover until the economy as a whole recovered, the director realised that the business would need to downsize in order to survive. Unfortunately, the company was tied into a 5 year lease and also had 4 employees who had been with the company for many years and so had large redundancy entitlements.
You can find out more about the voluntary liquidation process here...
Having met with the director and discussed his goals, he initially took the decision to close the business down as he was uncertain about its future viability. The company was placed into liquidation and the staff made redundant. The staff were then able to claim their redundancy pay from the Redundancy Payments Service and the Liquidator was able terminate the lease.
Shortly after the company had been placed into Liquidation, the director was approached by a number of former customers who were keen to continue to trade with him because of his good reputation within the industry. The director came up with a plan to restructure the underlying business and made an offer to the Liquidator for the company’s equipment and some of its stock. This offer was higher than any other offers and so the Liquidator was able to accept.
After this, the director was free to set up a new limited company and could downsize to new premises with fewer staff. This ultimately enabled the business to survive. We were also able to assist the director in arranging a factoring facility for the new company which gave him the immediate funding required.
