A comprehensive guide to Company Voluntary Arrangements - when they're suitable, how they work, and what they mean for your business.
A Company Voluntary Arrangement (CVA) is a formal insolvency procedure that allows a financially distressed company to reach a legally binding agreement with its creditors to pay back debts over an extended period, typically 3-5 years, often at a reduced amount.
Introduced under the Insolvency Act 1986, CVAs provide a lifeline for companies facing financial difficulties but with viable underlying businesses. Unlike liquidation, which results in the company's closure, a CVA allows the business to continue trading while addressing its debt problems through a structured repayment plan.
The CVA process involves proposing a formal arrangement to creditors that typically includes:
CVAs are not suitable for every financially distressed company. They work best for businesses with specific characteristics and circumstances. Understanding when a CVA is appropriate can save time, money, and potentially your business.
The company must have a fundamentally sound business model with the potential for profitability. CVAs don't work for businesses with no realistic prospect of recovery.
The business must generate enough cash flow to meet ongoing trading expenses plus CVA payments. Typically, this means at least £5,000-£10,000 monthly surplus.
There must be a reasonable prospect of achieving 75% creditor approval by value. This often requires pre-negotiation with major creditors.
CVAs typically work best for unsecured debts between £50,000 and £2 million. Very small or very large debts may have better alternatives.
Retail companies with multiple locations often use CVAs to:
Restaurants and hotels use CVAs to:
Construction firms often need CVAs for:
Manufacturers use CVAs to:
The CVA process follows a structured legal framework with specific timelines and requirements. Understanding each stage helps you prepare effectively and increases the chances of success.
Duration: 2-4 weeks
Duration: Immediate protection
Duration: 14-28 days
Duration: 1 day (decision meeting)
Duration: 3-5 years
Like any business rescue procedure, CVAs have both significant benefits and potential drawbacks. Understanding these helps you make an informed decision about whether a CVA is right for your situation.
Unlike liquidation, the company continues operating, preserving jobs, customer relationships, and business value.
Immediate moratorium prevents creditor legal action, winding-up petitions, and enforcement proceedings.
Typically pay only 20-40p per £1 owed, significantly reducing the total debt burden.
Directors usually remain in control of day-to-day operations, unlike administration.
Spread payments over 3-5 years, improving cash flow and operational stability.
Formal agreement encourages ongoing supplier relationships and trade credit.
CVAs are publicly registered, potentially affecting business reputation and credit rating.
Supervisor fees (typically £3,000-£10,000 annually) plus professional costs throughout the term.
Supervisor monitors business performance and can intervene if terms are breached.
May face restrictions on new borrowing, asset disposals, or major business changes.
If CVA fails, the company may face immediate liquidation with worse outcomes for creditors.
Directors' personal guarantees are typically not affected by the CVA arrangement.
| Factor | CVA | Administration | Liquidation |
|---|---|---|---|
| Business Continues | ✅ Yes | ⚠️ Maybe | ❌ No |
| Director Control | ✅ Retained | ❌ Lost | ❌ Lost |
| Debt Reduction | ✅ 60-80% | ⚠️ Variable | ⚠️ Variable |
| Public Record | ❌ Yes | ❌ Yes | ❌ Yes |
| Speed | ⚠️ 6-8 weeks | ✅ Immediate | ✅ Immediate |
| Cost | ⚠️ Ongoing | ✅ One-off | ✅ One-off |
Understanding the timeline involved in a CVA is crucial for planning and preparation. The process follows a structured legal framework with specific deadlines and requirements.
CVAs aren't suitable for every situation. Understanding the alternatives helps you choose the most appropriate solution for your specific circumstances and objectives.
Court-appointed administrator takes control to rescue the business or achieve better outcomes for creditors.
Directors voluntarily wind up the company when it cannot pay its debts.
Solvent company liquidation for tax-efficient closure and capital distribution.
Informal agreement with creditors to freeze debt collection while restructuring is negotiated.
Negotiated restructuring of debt terms without formal insolvency procedures.
Secure additional funding against business assets to improve cash flow.
| Situation | Recommended Solution | Alternative Options |
|---|---|---|
|
Viable business, manageable debt
Good cash flow, cooperative creditors
|
CVA | Workout Agreement, Standstill |
|
Immediate threat, viable business
Winding-up petition, enforcement action
|
Administration | CVA (if time permits) |
|
Unviable business, insolvent
No prospect of recovery
|
CVL | Administration (for asset sales) |
|
Solvent, planned closure
Retirement, business sale
|
MVL | Trade sale, Management buyout |
|
Temporary cash flow issues
Seasonal business, contract delays
|
Asset Finance | Standstill, Invoice factoring |
These anonymized case studies demonstrate how CVAs work in practice and the outcomes achieved for different types of businesses.
Multi-location fashion retailer facing closure due to COVID-19 impact
Early intervention before crisis point, strong underlying brand, landlord cooperation on rent reductions, and realistic cash flow projections that demonstrated viability post-restructuring.
Specialist contractor hit by major contract bad debt
Maintaining key supplier relationships was crucial for ongoing operations. The CVA allowed the company to demonstrate improved contract selection and risk management, leading to renewed confidence from sureties and clients.
Manufacturing company where CVA was unsuccessful
CVAs require realistic assessment of future viability. Over-optimistic projections and insufficient operational restructuring led to failure. Earlier liquidation might have achieved better creditor returns and avoided additional costs.
CVAs are complex legal procedures that require specialist expertise. The success of your CVA often depends on the quality of advice and implementation. Here's what you need to know about getting the right professional support.
Comprehensive review of your financial position, business viability, and available options.
Clear recommendation on the best approach, including CVA suitability and alternative options.
Detailed action plan with timelines, costs, and immediate steps to protect your business.
Don't navigate the complexities of CVAs alone. Get expert guidance from licensed insolvency practitioners with proven CVA experience.
Qualified business specialists • No obligation consultation • Same-day response
Remember: CVAs are not suitable for every situation. A thorough assessment by qualified professionals is essential to determine the best approach for your specific circumstances. Early intervention significantly improves success rates and outcomes.
Get answers to the most common questions about Company Voluntary Arrangements, their benefits, and how they work.
Our experienced team can help you determine if a CVA is right for your business and guide you through the entire process.