In 2021, a manufacturing company approached Greenfield Recovery Limited. The company had previously been successful, and worked on major contracts.
However, the company was now struggling with some £10.4 million of debts following the Covid-19 pandemic. Multiple lockdowns had impacted the company’s contracts, disrupting its supply chain of components and causing some delivery contracts to be cancelled or suspended. The situation was looking bleak, with a number of the company’s creditors initiating legal action.
From January 2021 onwards, trade was recovering and the company was securing significant customer contracts and orders. This promised future cashflow, in conjunction with a payment break included in the CVA, would facilitate a rescue of the company and avoid liquidation. Furthermore, the up-turn provided creditors with the prospect of payment in full.
Also, some financial restructuring needed to take place in order to prevent the loss of jobs and the likelihood of contracts being cancelled. The CVA provided a breathing space and allowed time to make these changes.
We set out remedial options and when the director had decided to go ahead with the CVA, we assisted in collating financial data and preparing forecasts. Crucially, we dealt with the legal formalities of lodging CVA documents in the court.
We assisted the director in preparing the CVA proposal, the statement of affairs of the company, cashflow projections and an estimated comparative outcome statement – which set out clearly to creditors, why the CVA was a better option than liquidation. The CVA was subsequently approved by a significant majority of creditors.
With the CVA now in place and getting off to a good start, the company’s future is now looking far more secure.
The company remarked, “We have been working with Greenfield Recovery Ltd for the past 5 months. Their whole team are courteous, knowledgeable and extremely helpful with their advice. In these unprecedented times it is really refreshing to have a company you can talk to and they will listen. Their information has assisted our company in making informed decisions to enable us to continue with our business and our passion.”
It is important that a CVA is flexible when drafted, and each CVA is tailored to the individual company’s circumstances. From our recent experience, CVA clauses for payment holidays and adaptable options are being approved. A CVA will not be suitable for all companies, but that is where our wealth of experience as insolvency practitioners comes in.
Contact us about our range of business recovery and restructuring options. It may be that your company is not beyond rescue and insolvency can be avoided.
Business Recovery and restructuring options include:
- Moratorium (with a range of non-insolvency/informal and insolvency options available)
- Restructuring Plans (recently brought into force due to the Corporate and Insolvency Governance Act 2020)
If you have creditor pressure, it is never too early to seek professional advice. With bounce back loans now falling due and also the return of winding-up petitions on the horizon, taking action now may prevent failure of the business and put a post-pandemic business rescue plan in place.