Creditor Negotiations
The Challenge
The company, now a Group, had been trading for nearly 35 years and was well known and respected in its niche industrial sector. They had strong revenues but couldn’t get on top of their debts so called Company Debt because of severe creditor problem. At least three of the creditors were threatening Winding Up the company and several were at County Court stage.
A board meeting was held and the directors disclosed it had been a very hard two years due to the recession and large Invoices simply not being paid. Although the company had committed to various payment plans with the best intentions they just couldn’t maintain them and were ‘just letting people down’ and losing trust. The bottom line was they had read up and didn’t want to go down the CVA or Liquidation route and wanted to try and negotiate with the individual creditors.
The challenge was there were 84 Creditors in total. We made the directors aware this is the most expensive way to manage the problem but the clients were insistent. The directors had managed the HMRC liabilities well and there were none thankfully which made the challenge less daunting.
OVERALL DEBTS TO THE COMPANY: £336,000 – COMPANY TURNOVER: £2.2m – EMPLOYEES: 22
The Solution
We set up a meeting with the accounts department and financial director and agreed a creditor contact communication strategy. Within the strategy we hoped for the best but planned for the worst so had a Plan A, Plan B (CVA), and Plan C (Liquidation).
We agreed a cash-flow forecast and a budget was agreed as to what the company could afford and more importantly sustain without showing preference (just in case Liquidation was the outcome). We targeted 23 critical creditors and started negotiations with each one. Slowly over the coming weeks we were able to get even the most sceptical of the creditors ‘on board’ with the payment plans apart from one company. The only company that wouldn’t agree went into liquidation itself several months later.
The company is trading quite successfully now and the payment plans are still in place and managed by the company finance team.Non-statutory payment plans were agreed with the various creditors ranging from 3-12 months.
