Fine dining restaurant
Despite the directors’ best efforts to reduce overhead, there was a risk the position could worsen and the threat of liquidation loomed.
What was the issue?
Bailey Ahmad were approached by the company director of a fine dining restaurant. Having traded successfully for three years and gained a strong reputation, the recession in 2008/09 had seen customer spend reduced, which put cash flow under pressure. As a result, arrears had started to build with certain creditors, the largest being HM Revenue and Customs. Despite the directors’ best efforts to reduce overhead, there was a risk the position could worsen and the threat of liquidation loomed.
How we advised and helped
Working closely with the directors and their book-keeper, we were able to structure a proposal for a Company Voluntary Arrangement (CVA) which was accepted on the following terms:
- An agreement with the landlord for a 50% rent reduction for three years to help stabilise cash flow
- Further personal investment by the directors over a three-month period to be ring-fenced for creditors within the CVA in full and final settlement of the company’s historic debt. This resulted in an estimated return to creditors of 20p in the £ in the CVA, compared to a £0 return in liquidation
- The proposal provided that all future expenses would be met as they fell due, and there would be no additional requirement to contribute to the historic debt burden unless substantial profits materialised within the first 10 months of the CVA
What the results were
- Creditors received more than in liquidation
- The company and business survived based on a sustainable and well thought out plan
- Jobs were saved
- The landlord continued to receive rental payments
- The CVA provided the owners an opportunity to achieve their long-term aim of building a successful and profitable business
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