CVA vs Administration: Complete Guide for UK Businesses

Understanding the key differences between Company Voluntary Arrangements and Administration procedures to make the right choice for your business recovery.

12 min read
Insolvency Team

Quick Comparison Overview

Aspect CVA Administration
Control Directors retain control Administrator takes control
Duration 3-5 years typically 12 months (extendable)
Creditor Approval 75% by value required Court or qualifying holder
Best For Viable businesses Urgent protection needed

What is a Company Voluntary Arrangement (CVA)?

A Company Voluntary Arrangement (CVA) is a formal agreement between a company and its creditors to pay back debts over an extended period, typically 3-5 years. It's designed for businesses that are fundamentally viable but experiencing temporary cash flow difficulties.

Key Features of CVAs

✅ Advantages

  • Directors remain in control of the business
  • Company continues trading normally
  • Creditor pressure is removed
  • Flexible repayment terms
  • Preserves business relationships

⚠️ Disadvantages

  • Requires 75% creditor approval by value
  • Long-term commitment (3-5 years)
  • Public record affects credit rating
  • Ongoing supervisor fees
  • Failure can lead to liquidation

What is Administration?

Administration is a formal insolvency procedure where an independent administrator takes control of the company to achieve one of three statutory objectives: rescuing the company as a going concern, achieving a better result for creditors than liquidation, or realizing property to make distributions to secured or preferential creditors.

Key Features of Administration

✅ Advantages

  • Immediate protection from creditors
  • Moratorium on actions
  • Professional management expertise
  • Can facilitate business sales
  • Statutory powers to investigate

⚠️ Disadvantages

  • Directors lose control completely
  • High costs and fees
  • Significant reputational damage
  • May lead to redundancies
  • Limited time frame (12 months)

When to Choose CVA vs Administration

Choose CVA When:

  • Your business is fundamentally viable with good future prospects
  • You have temporary cash flow problems
  • Creditors are likely to support the proposal
  • You want to maintain control and relationships
  • There's time to negotiate with creditors

Choose Administration When:

  • You need immediate protection from creditors
  • Actions or winding-up petitions are imminent
  • The business needs restructuring or asset sales
  • Professional management expertise is required
  • CVA approval is unlikely to be achieved

The Process: Step by Step

CVA Process

1

Initial Assessment

Evaluate business viability and prepare detailed financial projections showing how creditors will be paid.

2

Proposal Preparation

Draft comprehensive CVA proposal with nominee's report and send to all creditors.

3

Creditor Meetings

Hold creditor and shareholder meetings to vote on the proposal (75% approval by value required).

4

Implementation

If approved, CVA becomes binding on all creditors and monthly payments begin as agreed.

Administration Process

1

Application

File application with court or use out-of-court appointment by qualifying floating charge holder.

2

Administrator Appointment

Licensed insolvency practitioner appointed and takes immediate control of the company.

3

Strategy Development

Administrator assesses options and develops strategy to achieve statutory objectives.

4

Implementation & Exit

Execute strategy (rescue, sale, or liquidation) and exit administration within 12 months.

Cost Considerations

CVA Costs

  • • Nominee fees: £5,000-£15,000
  • • Supervisor fees: £2,000-£5,000 annually
  • • Costs: £5,000-£20,000
  • • Court fees: £280-£770
  • • Total: £10,000-£30,000+ over term

Administration Costs

  • • Administrator fees: £15,000-£50,000+
  • • Costs: £5,000-£20,000
  • • Court fees: £280-£2,090
  • • Other costs: £5,000-£15,000
  • • Total: £25,000-£85,000+

Need Help Choosing the Right Option?

Our experienced insolvency team can assess your situation and recommend the most appropriate procedure for your business.

Free Consultation Our Services

Already in liquidation? We can still help with ongoing support and misfeasance claim advice.

Post-Liquidation Director Protection

Related Articles

5 Essential Steps to Financial Restructuring

Learn the critical steps every business owner should take when facing financial difficulties.

Director's Legal Responsibilities During Financial Distress

Understanding your legal obligations as a company director when facing financial difficulties.