Company Voluntary Arrangements (CVA's) - Case Study & Testimonial

46 Year Old Engineering Company Saved

Company's Circumstance

The company operated a small sub-contract machining business and had traded for 46 years. The company had gone through a management buy-out and entered into a contract for volume manufacturing for a specific client in automotive industry. The directors of the company felt that the contract could be extremely profitable.

To service the contract, expensive new machinery was required and the consequent drain on cash flow was significant. Anticipated levels of turnover were never achieved and machine failure meant that some of the engineering had to be sub-contracted.

The company experienced cash flow problems leading to build up of debt to the Revenue and Customs & Excise and to unsecured creditors.


In October 2000 creditors approved a CVA for the company which provided for preferential to be paid in full and unsecured creditors to receive a dividend of around 57p in the £. The automative engineering contract was assigned to a separate business and the company returned to its core business as sub-contract engineers but focussed on undertaking contracts for well established blue chip clients.

Creditors agreed to an early conclusion of the CVA after 4 ½ years. The company had maintained its monthly contributions, traded profitably but wanted to bring the arrangement to an early conclusion by paying into the arrangement a sum equivalent to the last 6 months contributions.

Jobs were saved, the shareholders investments were safeguarded and creditors received a dividend of 47.85p in the £. Liquidation of the company would have meant cessation of trade of a 46 year old company and the loss of around 30 jobs. Creditors would have received a minimal payment.

Directors' Comments

We had never heard of a CVA and had concluded that the only solution was cessation of trade. The Business Debt Advisor talked us through all the possible solutions and we were quite simply amazed that creditors would accept less than payment in full.

The initial period of trading after the CVA was approved was initially tough as certain creditors would only trade on a pro-forma basis but once they realised the business was not going to fold, we were able to trade on normal credit terms.

The team at The Business Debt Advisor were extremely professional and we are delighted with the outcome especially as they kept their costs to a minimum.

The Next Step

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