Business Recovery Solutions – how SFP can help struggling firms

As a nationwide insolvency practice with 15 years of trading experience, SFP understands all too well how easily any firm, no matter their size or history, can fall prey to commonplace financial problems.

It’s for this reason that we have produced some different scenarios where circumstances can force businesses into turbulent waters and how SFP can help your firm to take action before it’s too late.

Scenario 1 – Failure of a CVA

Among the most common challenges which businesses – particularly those operating in the construction sector – face today is the speed with which customers transfer funds owed into their accounts. Indeed, late payments can prove a key contributor to the cashflow issues of SMEs and large-scale firms alike, leaving them unable to pay their suppliers or creditors.

Those companies most severely affected by such delays may opt for a Company Voluntary Arrangement (CVA) which could provide certain relief on creditor payments over a fixed period. On the basis that agreed payments are kept up too, the CVA would bind them and prevent action. If, however, their late receipt of funds from customers continues, then this in turn can lead the business to default upon its CVA. In this circumstance, although it might be possible to work with the supervisor to propose a variation that is acceptable to the creditors, a term of the CVA will invariably provide that the supervisor should present a Winding Up Petition.

But this situation needn’t spell certain doom for any firm – that’s where SFP comes in. Our team can assist with placing the company into Administration. This business recovery process may include us formulating a long-term solution or at least working to preserve your business and assets.

Take QFSL Cleaning UK Limited, a cleaning contractor and facilities management services firm which came to us after defaulting on its CVA and facing the threat of a Winding Up Petition. SFP helped to successfully complete the sale of this business to QFSL (Hull) Limited in 2017, preserving its goodwill and saving all employees’ positions in the process, transferring staff to the purchaser via the Transfer of Undertaking (Protection of Employment) Regulations 2006 (TUPE).

Scenario 2 – Immediate action requiring a pre-pack administration

Upon entering Administration, some companies need any turnaround procedures to involve retaining key elements to that business. For instance, a healthcare firm which owns multiple care homes would want to ensure the security of these properties if their business is to be sold, not only to protect the jobs of its care-workers but also the safety of vulnerable residents.

South Yorkshire Care Limited found itself in this very situation in 2017, running into arrears with HMRC – despite having turned over circa £1.5m the previous year – before eventually entering a CVA. When the CVA failed, SFP assisted the company in undergoing a pre-pack Administration. After reviewing their business and valuating their care homes, SFP helped the company to restructure by selling the business of each care home and ensuring their residents’ safety as a result.

Whether a pre-pack sale is suitable for your business in the event of insolvency and Administration depends on its situation and requirements. As SFP director Simon Plant commented in relation to the South Yorkshire Care sale, this restructuring approach was appropriate as there were concerns surrounding the continuity of care for the vulnerable residents.  Pre-packs are only possible where they are assessed to produce the best available outcome for creditors and are subject to strict regulations.

Scenario 3 – A major customer failure impacting upon your business

It’s not always the companies approaching us which have entered into a CVA – it can often be a creditor of the business suffering from the impact of the CVA. For Heart to Heart Recruitment, their cash flow troubles came about due to their biggest client entering a CVA.

The effects of the CVA were plain to see for Heart to Heart, as they struggled to meet payroll obligations to their contract staff. SFP intervened at the recruitment firm’s request, valuating the business, marketing it for sale and ultimately selling the business and assets on a going concern basis.

If your business finds itself in a similar situation, with funding pulled by clients due to them having entered a CVA, or liquidation, we would strongly advise getting in contact with us as soon as possible to minimise the harm which these circumstances might inflict upon your circumstances such as employee relations, trading reputation and customer care.

Find out more

We hope that you’ve found this guide to be a useful introduction to just some of the business recovery and turnaround services that SFP offers. For more information on how we can help your firm with restructuring, data storage, property issues and other business issues, be sure to get in touch with our team today.

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