CVA Case Study: Helping a Profitable Consultancy Business Avoid Liquidation

A consultancy business approached our Head of Business Recovery & Insolvency, Shona Campbell after historic liabilities led to increasing creditor pressure and growing concerns about its financial position. Despite the debt burden, the company remained profitable. In addition, it benefited from predictable recurring revenue through a strong portfolio of long-term contractual clients.

Following a detailed review of the business’s viability, we developed a Company Voluntary Arrangement (CVA) proposal. This proposal demonstrated a better outcome for creditors than a formal insolvency process. The proposal was approved. Consequently, this allowed the business to continue trading, repay historic debts through a structured arrangement, and refocus on future growth.

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The Challenge

The directors faced a difficult situation. Significant historic liabilities had accumulated, resulting in mounting pressure from creditors and creating uncertainty about the future of the business.

Importantly, the problem was not a lack of profitability. The company continued to deliver profitable consultancy services and maintained a strong base of long-term clients that generated reliable recurring income. However, a combination of external pressures and operational challenges had restricted cash flow. As a result, the business was prevented from addressing historic debts as they fell due.

The Covid-19 pandemic had adversely affected trading conditions and cash generation. At the same time, management time and resources were also heavily consumed by a complex legal dispute. As a result, attention was diverted away from resolving outstanding liabilities. This allowed creditor pressure to intensify.

The directors wanted to achieve several key objectives:

• Protect the profitable core business.
• Avoid liquidation and business disruption.
• Create a sustainable solution for repaying historic liabilities.
• Preserve relationships with creditors.
• Allow management to focus on serving clients and growing the business.

Given the financial complexity and stakeholder considerations involved, specialist restructuring advice was essential. The directors needed an objective assessment of the company’s viability and guidance on the most appropriate route. This support was required to secure its long-term future.

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Our Approach

We worked closely with the directors to evaluate both the immediate financial challenges and the longer-term prospects of the business.

A detailed viability assessment was undertaken to determine whether the underlying operation remained sustainable. This analysis confirmed that, despite the historic debt position, the business continued to generate profitable work. In addition, it was supported by recurring income from established contractual relationships.

To support a restructuring strategy, comprehensive financial forecasts were prepared. These projections assessed the company’s ability to continue trading successfully while meeting future obligations under a structured repayment arrangement.

Based on this analysis, our team developed a Company Voluntary Arrangement proposal for creditors. The proposal was carefully designed to balance the interests of all stakeholders by:

• Providing a structured framework for repaying historic debts.
• Allowing the company to continue trading.
• Preserving value within the business.
• Demonstrating a realistic path to long-term sustainability.

A critical aspect of the proposal was demonstrating that creditors would achieve a better outcome through the CVA than through a formal insolvency process. By presenting robust financial forecasts and evidence of ongoing profitability, we were able to support a compelling case for creditor approval.

Throughout the process, close collaboration with the directors ensured the proposal accurately reflected the commercial realities of the business and its future repayment capacity.

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The Outcome

The CVA was approved by creditors, delivering a practical solution. This solution addressed historic liabilities while allowing the company to continue operating.

Approval of the arrangement provided immediate stability and created a structured path for debt repayment over an agreed period. This removed the uncertainty associated with mounting creditor pressure and enabled management to redirect their attention towards core business activities.

The outcome protected a profitable consultancy business that had strong long-term prospects. Moreover, it ensured creditors received an improved return compared with the likely outcome of a formal insolvency process.

Key benefits included:

• Avoidance of liquidation.
• Continued trading and uninterrupted service delivery.
• Structured repayment of historic debt over an agreed period.
• Reduced creditor pressure.
• Protection of a profitable core business.
• Greater management focus on growth and client service delivery.
• Improved outcome for creditors compared with formal insolvency.

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Key Results

• Company Voluntary Arrangement approved by creditors.
• Profitable consultancy business avoided liquidation.
• Historic liabilities restructured through an agreed repayment plan.
• Management able to focus on core operations and future growth.
• Creditors achieved a better expected return than through formal insolvency proceedings.

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Why This Matters

Many businesses experiencing financial distress are not fundamentally unviable. Historic debt can arise from exceptional circumstances, such as economic disruption or significant unforeseen events. Even where the underlying business remains profitable, these circumstances can have an effect.

This case highlights the importance of assessing business viability before assuming that formal insolvency is the only option. Through careful financial analysis, realistic forecasting and stakeholder engagement, it is often possible to implement a restructuring solution. Such a solution protects trading operations while addressing creditor concerns.

For directors facing creditor pressure but operating a fundamentally sound business, a Company Voluntary Arrangement can provide a structured route to recovery. This preserves value for the company, its clients and its creditors.

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