Successful Company Voluntary Arrangement for RDi International
The Difficulties Encountered by the Company
Formed in 1993, the Company traded profitably for a number of years, managing and developing domestic cleaning and related brands. However, difficulties started to be encountered from c.2007, which ultimately led to an insolvent situation, despite considerable efforts by the directors to restructure the business and turn things around. The main reasons for the difficulties were:
- Poor and inaccurate financial reporting
- High levels of overheads, in particular payroll costs
- A significant investment in a Hong Kong office that was made before the poor and inaccurate financial reporting issues noted above came to light. As a result the office had to be closed and an urgent restructuring of the business had to take place.
- Purchase of Stock for a major sales promotional campaign that failed, resulting in stocks that had to be realised below cost
- Diversion of the Directors’ time away from developing new business and increasing sales as a result of the time required to address the Company’s difficulties.
The efforts taken to improve the Company’s position at the time included:
- Reducing overheads (staff salaries and consultancies)
- Winning back some traditional customers
- Moving to a smaller cheaper office.
However, despite these moves, and encouraging trading prospects, the outstanding liabilities that had been built up, in particular to HMRC, could not be repaid in the short run, and the Company was insolvent. A Company Voluntary Arrangement was proposed, which is where we came in.
Why was a Company Voluntary Arrangement (“CVA”) Proposed?
Compulsory liquidation, Voluntary winding up and Administration were considered as insolvency procedures, but the recommended procedure was for a Company Voluntary Arrangement with the Company’s creditors.
This was because of the initiatives that had already been taken by the Directors to restore profitability, as detailed above. These weren’t enough to avoid the insolvency, but along with the resulting positive trading forecasts and cash flow projections, the directors were confident that the Company would return to a cash positive situation. In addition, it was believed that the Company would be able to meet the financial demands of the CVA proposal.
A CVA enables a business to continue trading, if approved, such that creditors will benefit from future profits and, as a result, increase their return. In this case, it was estimated that over the course of the CVA that the return to unsecured creditors was 100p in the £, compared to nothing if the Company was wound up.
As a result, it was agreed that in this case, a Company Voluntary Arrangement was the most appropriate insolvency procedure for the creditors, whilst also creating the time and space for the Company to turn itself around for the benefit of its employees. As can be seen from the testimonial below, the CVA was successful.
What the Client had to Say About Our Work
Antony Batty was appointed nominee for the CVA in January 2013, supported by senior insolvency administrator, John Baalham. The process has now reached a successful conclusion, as the following testimonial shows:
“A big thank you to and your team for successfully taking us through the CVA process. Over the years we have found the help and advice very professional and the response for information request extremely prompt.
Your excellent service has assisted us immensely during the process and enabled us to cross the finishing line in good shape.
On behalf of all at RDI International I wish you and the team at Antony Batty all the very best for the future and I am sure many more will benefit from your services.”
Norman Manan (Finance Manager)
RDi International “Award Winning, Innovative Cleaning Brands”
