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 £800,000
- Trading for approximately 4 years
- Historic debt problems due to interruptions to contracts as a result of extended periods of bad weather
- Unable to agree a viable Time to Pay Arrangement with HMRC
How We Helped
This company had operated profitably and continued to grow for over 3 years before a period of exceptionally heavy Spring rain and late frosts caused prolonged delays to all of its contracts. These delays led to significant arrears building up with the company’s creditors as the director was unable to do anything to reduce overheads as it was unclear how long the delays would last.
Despite the arrears, the company was able to continue to trade for the following 12 months as levels of new work were sufficient to enable it to meet its ongoing costs and also reduce the old debt. Whilst the director felt that the company was now going in the right direction, HMRC was unsatisfied with the rate at which the arrears were being reduced.
In order to properly deal with the HMRC arrears, the director contacted HMRC in order to negotiate a Time to Pay Arrangement (TTP). Based on the background of how the arrears had come about, HMRC was willing to offer a TTP to the company. However, due to the level of arrears, the monthly payments required by HMRC would not have been sustainable.
You can find out more about the voluntary liquidation process here...
Knowing that he could not accept the TTP, the director approached us for advice. We reviewed the company’s financial situation and based on this review it was confirmed that neither the proposed TTP nor a CVA was realistically feasible. The director therefore concluded that the company should be liquidated as it was clearly insolvent and he did not want to incur further liabilities.
However, the director remained convinced that had the company not suffered so badly as a result of the exceptional weather a year earlier, it would have remained a viable business. With this in mind, he set up a new limited company to trade forwards and immediately following the appointment of the Liquidators he made an offer to purchase the goodwill and assets.
The director’s offer was far in excess of the other offers received and as such was accepted by the Liquidators. A sale agreement was therefore entered into with the director’s new company which provided for the sale of the goodwill and assets and the transfer of all of the company’s employees. Payments were structured over a number of months with the director providing a guarantee to ensure these were met. With this in place, the new company began to trade immediately without unnecessary damage to the long established client relationships.
