Steve Marshall, one of our Directors, who heads up the Antony Batty & Company Brentwood office, reports on a ‘no fault’ Creditors Voluntary Liquidation driven by Covid and subsequent difficult trading conditions, where the business and assets were sold on our appointment, saving jobs in the process.
This case study shows that if it proves to be impossible to save a business that is in financial difficulties, and liquidation is the only realistic outcome, whilst our responsibilities are with the creditors, it is still possible to sell a business and its assets, saving jobs in the process.
Background to this Creditors Voluntary Liquidation
This family run theatre and dance school, based in Essex, was founded in 2013, and initially operated as a dance school only, making modest profits, whilst operating at 4 different locations. A permanent premises was found in December 2018 and a 15-year lease was signed. Planning permission was granted to renovate and refurbish the premises so that the business could trade as a dance school, theatre, café and bar. The work was completed in September 2019, with the cost being covered by a loan from Funding Circle.
In March 2020, 6 months after opening, the first Covid lockdown was imposed and the business was unable to trade at all. All staff were placed in furlough, and a Bounce Back Loan was received in June 2020, although no rent break was granted.
With further lockdowns following in November 2020 and January 2021, planned events had to be cancelled or postponed and customers who had bought tickets had to be refunded. As a result, turnover for the year ending 31st March 2012 was 40% down and a loss was incurred, mitigated to a certain extent by Covid support funding and grants.
Although the business was finally able to reopen fully in July 2021, the Pantomime held over from the Christmas lockdown (usually a major source of revenue) saw a fall in audience numbers and revenue, and the company was already in a position where it looked like it would not recover from the Covid caused problems. The rise of the Omicron variant meant that the Christmas 2021 Pantomime had to be cancelled, meaning that further revenue was lost.
Adding to their financial problems, in the Spring of 2022, the directors found that the levels of debt reported in the Company’s internal accounts had been understated due to the actions of a former staff member, which was compounded by HMRC informing the directors that the Company was in arrears of its VAT and PAYE payments.
The directors continued to work hard to turn things around, with one director making a loan to the Company as the business’s losses increased, even as turnover began to recover. In the first full year of post pandemic trading, although turnover increased, strongly, the absence of any further Covid funding saw losses increase.
As high inflation, growing energy costs and rising interest rates bit, the Company was unable to service the level of historic debt incurred by the cost of refurbishing the trading premises and Covid borrowings. In addition, the Directors were not in a position to advance any further personal loans to keep the Company going. Other investment opportunities were explored unsuccessfully, and as a result a specialist business and asset valuation company was appointed to conduct a valuation of the business and its assets.
Antony Batty and Company was appointed as Liquidator
This led to the Directors agreeing to the sale, in principle, of the Company’s business and assets to another company. Licences to trade and occupy the trading premises were agreed and the Directors sought advice from Antony Batty and Company.
The prospective purchaser commenced trading under licence from 5th January 2024. It was clear that the Company could not avoid formal insolvency and a Creditors Voluntary Liquidation represented the most appropriate way forward. Antony Batty was subsequently appointed Liquidator to facilitate the early sale of the Company’s business and assets; a positive outcome which saved jobs, preserved pre booked events and ensured minimal disruption to students of the dance school and customers generally.
Comment by our Insolvency Practitioners
At a time when many businesses are suffering due to historic debt burdens in the post pandemic world, and the on-going difficult trading conditions caused by high energy costs, the rising cost of living and the increase in employers’ National Insurance and the minimum wage, it is not surprising that insolvencies are rising. The latest Insolvency Service figures show that registered company insolvencies in England and Wales in the first quarter of 2025, totalled 5,998, compared to 5,697 in 2024, an increase of over 5% on the same period in 2024 , many of which are ‘no fault’ insolvencies as this one was.
It is always our first objective to see if we can save a company and turn its fortunes around, with an insolvency procedure such as an Administration or a Company Voluntary Arrangement. However, when a Creditors Voluntary Liquidation is the only realistic outcome, our aim is to wind a company up in as orderly way as possible. If, as in this case, we are able to help with an early disposal of the business and assets for value to ensure it can continue to trade under new owners and save some jobs in the process, then that is the best outcome under the circumstances.
If you or your business is facing insolvency, the sooner you contact us, the more we can help.
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If your business is facing financial difficulties, the best advice is always to seek professional advice early.
As our insolvency and restructuring guide shows, the road from financial distress to crisis can be quick and brutal. With the former, there might still be an opportunity to restructure the business and turn it around if professional advice and help is sought quickly.
However, once the crisis point is reached, often characterised by a lack of liquidity, which makes it impossible to pay HMRC, suppliers, meet overheads, pay staff, or simply finance the running of the business, then that is when a formal insolvency procedure is required.
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Also, K&W Recovery, trading as Antony Batty and Company, Thames Valley:
