Web Design Company With Bad Debts

The Challenge

A Surrey-based web design and marketing company with a small annual turnover of £280k faced financial difficulties due to previous bad debts and an extremely competitive marketplace. The company’s business model, where clients paid only on results, led to significant work being completed before any payment was received, causing severe cash flow issues. Despite the director cutting costs and making four redundancies, the company was insolvent. The situation was critical, with HMRC owed 96% of the £193k unsecured debt and threatening to levy distraint on the company’s assets due to an 18-month history of non-compliance.

The Solution

The director contacted RMT KSA, who focused on proposing a Company Voluntary Arrangement (CVA). RMT KSA immediately began liaising with HMRC to persuade them to hold off on any distraint action while the CVA proposal was prepared and considered.

The Results

The rescue attempt was a success. HMRC approved the CVA with standard modifications on April 27, 2012, and the CVA was formally approved by all creditors at a meeting on May 15, 2012. Given that HMRC was the majority creditor with a 96% stake by value, their approval carried the vote. The CVA proposed a dividend of 46p in the pound, a much better outcome than a liquidation.