CVA case study – Public house
|Business description||Public house and restaurant|
|Employees||Directors manage the business with a number of part-time staff|
|Business premises||Premises are owned by the company|
|Less: Due to bank||(£324,348)|
|Fixtures and fittings||£23,337|
During the first years of trading, the directors invested a large amount of money into the business to achieve profitability. Unfortunately, in the time taken to develop the business, debts accrued and creditor pressure became increasingly aggressive. The directors feared the bailiffs could be instructed which would threaten the survival of the company.
Immediate plans were introduced for further investment via the shareholders to create a further four bed and breakfast rooms. As well as the further investment, the business was also restructured before our involvement and a new management team employed to try and increase revenue and repay bad debts.
With the shareholders investment and the opening of the new bed and breakfast rooms, cash flow increased and the forecasts were healthy. Payments of debts increased but some more aggressive creditors still threatened legal action. The directors sought the help of Wilson Field so they could be informed of their options.
After reviewing the cash flow projections and plans to increase revenue, we advised on the company’s options for rescuing the company. The directors decided that using a company voluntary arrangement (CVA) would be their best option.
- Creditor pressure removed
- The company paid back what they could comfortably afford over a five year term. An agreement was made to repay 30p in the £1.
- The overall debt was reduced by £41,622. At the end of the CVA term, any remaining debt would be written off.