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Wednesday, 10 June 2009

Case Study: Pre-Pack Administration for London Recruitment Company

See our new case study on pre pack administration by clicking the link above

If you have a recruitment company with problems call Keith Steven on 07974 086779

Here is an extract from the case study......

Case Study: Pre-Pack Administration for a Recruitment Company

As licensed insolvency practitioners we are never really shocked at the things we hear and see. However, the scale of the fall in sales in this London based recruitment company was stunning.

From sales of £3m pa and making £250,000 net profit in 2007-8 financial year, this business was hammered by the recession and saw sales fall to under £600,000 pa, making a loss. The legacy debts to HMRC were much too big for the now smaller company to repay and the directors were like rabbits in the headlights. How could the company repay hundreds of thousands of tax debts, get rid of a lease on a too-big office and keep the business functioning? They had let most of the 25 recruitment consultants go keeping the most productive sales people, so costs were now lower but the ball and chain of the debt remained.

KSA considered a
CVA solution first for this business but the CVA would have been difficult enough when a winding up petition was threatened and delivered by a supplier. A third party also had approached the directors offering to assist and fund the business in future. The deal was the third party investor would look after the financial reporting, offer space in its own offices and provide guidance to the management. The plan was for a new smaller business with nil debt and the "oldco" directors would be shareholders in "newco". After being dragged down emotionally by the debt pressure, this was too good an offer to refuse.

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