Case Studies
At Hart Shaw Business Recovery & Insolvency, we are used to helping people and companies deal with a wide variety of financial problems. Whether you are an individual who is overextended with consumer credit or are the director of a company facing closure, we can help you resolve your difficulties. Over the years we have helped hundreds of individuals and companies resolve their problems and in doing so have developed a wealth of experience, knowledge and skill.
Below are outlines of actual cases that we have dealt with over the last few years. Use the links to jump down the page.
Individual Voluntary Arrangements
Mrs F.
Mrs F had debts totalling £46,326. She had recently got married and had bought a house for £112,000 with a 95% mortgage. Although she was looking forward to married life in a new house she was struggling to pay the debts she had built up during the preceding ten years. Her salary was not covering her liabilities and she was paying the minimum monthly payments and withdrawing cash to make ends meet. Clearly this could not continue and she sought our advice.
We assessed her income and expenditure and concluded that she could afford to pay £250 per month towards her debts. We presented her creditors with a proposal for an Individual Voluntary Arrangement based on monthly income payments of £250 for five years giving an estimated dividend of 21 pence in the pound and this was approved by her creditors.
Mrs F will therefore pay £15,000 over five years in full settlement of her debts of £46,326. At the end of the five years Mrs F will be debt free and she will be able to keep her house.
Miss O.
Miss O had debts of £224,424 following the failure of a business several years before. The only asset she had was her home which was worth £105,000. Miss O was not working as she had recently had a baby and was being supported by her boyfriend.
With the support of her boyfriend, we assisted in the re-mortgage of her home which realised the sum of £30,300. We presented creditors with an Individual Voluntary Arrangement proposal to accept the £30,300 as a one off payment in full settlement of all liabilities. With no other assets or income, creditors accepted the Individual Voluntary Arrangement and we paid a one off dividend of 10 pence in the pound. Miss O is now debt free and she has been able to keep her house.
Mrs T.
Mrs T had been unable to work for several years due to family problems and had incurred credit card and loan liabilities totalling £34,000. She sought our advice and having discusses her affairs with her family, was able to offer her creditors a one off payment of £13,600 from a family member. This offer was presented to her creditors in an Individual Voluntary Arrangement and was accepted by them. After the agreement of creditor claims, Mrs T’s creditors received a dividend of 25 pence in the pound. The Individual Voluntary Arrangement lasted for just eight months and Mrs T is now debt free.
Mr & Mrs B.
Mr & Mrs B are the landlords of a public house whose business has suffered due to substantial increases in rent and falling turnover due to changes in drinking habits. Between them Mr & Mrs B have creditors totalling £52,000. Mr & Mrs B had decided to sell the pub, move into rented accommodation and take up paid employment. However the sale of the pub was not progressing and they had run out of money and could not pay their creditors. Faced with closure of the pub and the loss of their business Mr & Mrs B sought advice. We helped them propose Individual Voluntary Arrangements to give them a breathing space while the pub was sold. Furthermore the Individual Voluntary Arrangements allowed them to retain funds from the sale of the pub to assist them in setting up a new home. The Individual Voluntary Arrangements were approved and Mr & Mrs B were able to continue trading and so allow the sale to complete. When completed the creditors are estimated to receive 45 pence in the pound.
Mr T.
Mr T had loan and credit card debts totalling £66,000 which he had incurred over a six year period. Mr T had re-mortgaged his home and offered his creditors a one off payment in settlement of his debts. This offer was rejected by his creditors and he sought advice from us. We advised him that he should propose an Individual Voluntary Arrangement based on the one off payment and this was put to creditors. The Individual Voluntary Arrangement was accepted and three months later his creditors received a dividend of 24 pence in the pound. After just four months the Individual Voluntary Arrangement has been concluded and Mr T is now debt free.
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Limited Companies
Company Voluntary Arrangement
The company involved was a manufacturer of specialist light sources and was a leader in its field. Over a short period of time the company experienced a dramatic fall in turnover of more than 50% due to a combination of factors. Without a corresponding reduction in overhead the company was trading at a significant loss. The company took advice and identified the need to reduce the workforce by half in order to survive. However, the company had been trading for 23 years and the majority of the workforce had long periods of service. Consequently the cost of the proposed redundancies was in excess of £60,000. To compound this problem the company received a claim from a former director totalling more than £100,000 which could not be paid.
The Company’s cash flow became increasingly tight and the directors initially sought advice from a national firm of accountants. The directors were advised that the company was insolvent and that it should proceed in to liquidation. This advice was not accepted by the directors who after 23 years did not want to throw in the towel.
The directors were referred to us by their own accountant and we advised them that their business was fundamentally sound but that it just needed to operate on a reduced cost basis until turnover was able to increase.
Although liquidation was an option we felt that the interests of creditors (and the directors reputations) would be best served by saving the company through a Company Voluntary Arrangement.
Prior to presenting proposals it was clear that a large number of redundancies were necessary and so these redundancies took place. The directors made the relevant selections and we assisted in the formalities of declaring the redundancies. Because the company was insolvent and was about to enter into a Company Voluntary Arrangement, the company was not required to pay the employees their due redundancy and pay in lieu of notice claims. These claims became an unsecured claim in the Company Voluntary Arrangement and in these circumstances the Redundancy Payments Office pays the employees.
The company’s overheads now reflected the budgeted turnover and the company’s cash flow forecasts made sense.
The main terms of the Company Voluntary Arrangement were that the company would retain its outstanding book debts as working capital in exchange for paying the value of its assets, which amounted to £364,000, over a three year period.
The benefit to creditors of this was that the assets had been valued on a going concern basis and so the creditors would receive full value as opposed to a forced sale value which would be achieved under liquidation. This would maximise the dividend to creditors which was estimated at 51p in the £. The benefit to the company was that the business would continue, jobs would be saved and the directors would retain their both their company and their reputations.
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Administration & Company Voluntary Arrangement
This was a specialist engineering company with a world leading product which had been developed over a number of years. The company’s problems had arisen two years earlier when the company had overtraded by taking on three major projects across three continents – Australia, America and South Africa. Due to technical problems significant losses were incurred on these projects resulting in the company becoming insolvent. The director was able to continue trading the company despite it being insolvent due to the way that projects were funded.
After two years of struggle the company suffered a bad debt of US$400,000 which led to the director contacting us and taking formal advice. We advised that in order to protect the business the company should be placed into Administration. We were appointed Administrators of the company, took control of its assets and continued to trade the business. We met with suppliers and creditors to agree terms of trade to allow the company to continue trading. Terms of trade were also negotiated with the company’s customers to enable payments to be made on delivery and thus allow the company to trade on a cash positive basis.
After three months the company was trading well and we had dealt with all its problems. We identified that the best outcome for the company, its owners, its employees and the creditors was for proposals to be put forward for a Company Voluntary Arrangement as an exit route for the Administration. The basis of the proposal was that the company would dispose of certain assets and would pay monthly payments totalling £315,000 over 42 months. The company would also pay a proportion of any post tax profits generated during the term of the arrangement.
The Company Voluntary Arrangement was accepted by creditors and at the end of month six the Administration came to an end and the director took back control of his company.
The Administration was a complete success and all parties have benefited. The company survived and director / shareholders retained their business. No jobs were lost and creditors will receive the maximum dividend which they could expect which has been estimated at 24 pence in the pound.
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Creditors Voluntary Liquidation 1
The company involved operated a specialist restaurant and due to its success the director had opened a second restaurant within a year later. Unfortunately the second restaurant was less successful than the first and incurred significant trading losses which were being funded by the first restaurant.
In an attempt to make the second restaurant profitable, the director and a key member of staff from the first restaurant focused their time on the second restaurant. Unfortunately the problems at the second restaurant continued and the ongoing losses put at risk the company as a whole. Cash flow deteriorated to the point where suppliers would only supply if paid cash on delivery.
Faced with the failure of the company the second restaurant was closed and the director was referred to us for advice by one of our existing clients. We established that although the lease to the second restaurant was in the company’s name, the lease to the first restaurant was in the directors personal name. This meant that the director personally controlled the premises to the first restaurant and so would be able to continue trading even if the company failed. A valuation of the assets owned by the company was obtained and the director entered into an agreement for the purchase of the assets at this valuation. The business was transferred seamlessly from the company to a new company set up by the director and all jobs were saved.
The company was placed into liquidation and its affairs have been properly dealt with. The director was then free to focus on the first restaurant which is successfully moving forward.
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Creditors Voluntary Liquidation 2
The company had traded successfully as a manufacturer of specialist cleaning chemicals until the EU reclassified as a toxin its key chemical components. This meant that the company’s main product could not be sold in Europe.
In response to this the company invested heavily developing a new product range. Unfortunately developments costs were significantly higher than expected and sales for the new product were lower than expected. This severely affected the company’s cash flow and trading losses were incurred. The directors sought additional funding but with little success and with the company being insolvent, the company ceased trading and they transferred the assets and business to their other. Unfortunately the new company did not pay for the value of the business transferred.
The new company traded for several months before the company’s bank realised what had happened and froze both the new company’s and old company’s bank accounts. Without a bank account and what funds they had frozen, the company was unable to trade and the directors were referred to us for advice.
We negotiated with the bank and agreed with them a way forward which enabled the new company to continue trading whilst we dealt with the affairs of the old company. The old company was placed into liquidation and a figure was agreed with the directors for the value of the business transferred and this was paid by the new company. The bank debt, which the directors had personally guaranteed, was repaid in full from the company’s assets and the new company is successfully trading on. Having followed out advice the directors have been able to retain their business and so save job and they have also avoided their personal guarantees being called in by the bank.
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