A demolition firm has drawn up proposals to repay its creditors after several lobbied for it to be wound up.
Accountants Begbies Traynor has drawn up a proposal for a Company Voluntary Arrangement to be put to the creditors of Kent-based Lee Demolition.
According to the document, one creditor supported by two others had proposed the firm be wound up and about 30 others had issued county court judgements against it.
Under the proposed CVA, which is an alternative to liquidation, the firm would continue to trade and creditors would be paid a dividend of at least 23.6p in the pound for five years.
The CVA document said the company’s trade creditors were owed a total of £3.1m. HM Revenue and Customs is owed £715,000 and the directors are owed £123,000.
Some debts are excluded from the arrangement and will be paid in full in order to allow Lee Demolition to continue to trade. These debts include £20,287.23 owed to Ashstead Plant Hire and £7,500 of the £13,982.47 owed to Deborah Services.
The directors will not get a dividend under the proposed CVA to allow a higher dividend for other creditors.
The document said the firm’s turnover rose from £11m to £19m between 2011 and 2012, but profits after tax plummeted from £1m to just over £300,000.
The firm’s problems were caused by large losses on contracts including £220,000 on one at Farm Lane, £181,000 on its Able & Cleland contract and £240,000 on its Turnmill deal, the report said.
It added that the recent losses “are believed to be unusual and have been incurred by inaccurate costing and poor project management”.
It said that the firm’s directors “understand that the company is insolvent as it is unable to pay its debts as and when they fall due… the proposal for a CVA is being presented to creditors as an alternative to the company being put into liquidation”.
The report, first revealed by Demolition News, said the CVA would mean that creditors get repaid more of their money than they would if the firm went into liquidation.
It also said the directors believe the company is “positioned to perform well in the future” because it would reduce turnover to manageable levels, recruit a finance director, had current and future contracts to work on and because the directors would take a greater role in cost planning and operational matters on core contracts.