The successful CVL of scaffolding company, M & S Direct Access Limited, with a sale of the majority of the business and a dividend to preferential and unsecured creditors.
The challenge
We were introduced to the client, a scaffolding company, by the company’s newly appointed accountant.
The accountant had identified errors in the previous accountant’s work, which resulted in additional costs and liabilities for the company.
In addition, HMRC had threatened to petition to wind the company up and despite measures to reduce overheads, the director was unable to continue to trade.
Liabilities of £240k were identified, with a significant proportion due to HMRC.
The solution
With the assistance of the accountant and agents it became apparent that the recovery of the assets (primarily the scaffolding stock which was located across numerous sites) would be expensive.
The director believed that the business had potential and expressed an interest in acquiring certain assets from the liquidation.
Following the formal CVL and marketing attempts, agents recommended the acceptance of the director’s offer to purchase certain assets.
The outcome
Shortly after our appointment, a sale of certain assets was made to a connected party in accordance with insolvency rule requirements.
This strategy enabled the ongoing work in progress to be recovered. It also meant there was no need to incur the expense of removing the stock (scaffolding) to store and sell it to a third party, which would have significantly reduced any realisable value.
The sale was also structured such that it allowed the new purchasing company to defer the consideration over 12 monthly payments, assisting the new business with cash flow and enabling continuity with customers.
Preferential creditors received 100p in the pound and unsecured creditors received a dividend of 73p in the pound.
