The Company imported much of its stock from China and had experienced cash flow problems due to poor exchange rates and declining sales. The Company had also exceeded its credit limits with its primary supplier who were owed in excess of £750,000 and had put the Company on stop and were threatening legal action.
The Company had high staffing costs and premises costs which it had been unable to reduce despite the business having reduced turnover and needing to restructure its cost base to fit the profile of future trading performance.
The Company had significant indebtedness to the Bank in relation to both an overdraft and invoice financing.
Following a review of the business and the options available to it the directors wished to propose a Company Voluntary Arrangement and as Joint Nominee we commenced discussions with the Bank to seek continued support and funding for the business in the event of the Company continuing to trade through a CVA. We also approached the major trade supplier to establish their views on the proposed CVA as their vote at a creditors meeting would have been decisive in obtaining approval of the proposal.
Having gained support from the bank and the major supplier for the proposals in principle we then assisted the Company in reducing overheads and the Company vacated some of its premises reducing costs significantly and some redundancies were undertaken prior to issuing proposals.
After the costs had been reduced and a proposal prepared a creditors meeting was convened at which creditors, including the major supplier who had been in dispute with the Company, voted in favour of the proposals and the CVA was approved.
By taking these steps the Company was able to continue trading and, whilst some redundancies were necessary, more than 25 staff retained employment.
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