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.