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CVA case study – Public house

Company description

Business descriptionPublic house and restaurant
EmployeesDirectors manage the business with a number of part-time staff
Business premisesPremises are owned by the company
Turnover£215,000 p/a

Company assets

Business premises£343,435
Less: Due to bank(£324,348)
Equity available£19,087
Fixtures and fittings£23,337

Company liabilities

HMRC£44,000
Trade creditors£39,622

The Background

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.

The Solution

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.

The Benefits

  • 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.

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