What is a Company Voluntary Arrangement?
A Company Voluntary Arrangement (CVA) is a formal, legally binding insolvency procedure under the Insolvency Act 1986 that allows a financially distressed company to reach an agreement with its unsecured creditors to repay all or part of its debts over a fixed period — typically three to five years. Unlike administration or liquidation, a CVA allows the company to continue trading throughout the process.
A CVA must be proposed by a licensed insolvency practitioner acting as the nominee. The proposal is put to creditors for a vote, and if 75% (by value) of voting creditors approve it, the arrangement becomes binding on all unsecured creditors — including those who voted against it.
Who is a CVA Suitable For?
A CVA is most appropriate for companies that are fundamentally viable as a going concern but are struggling with a specific debt burden — such as accumulated HMRC arrears, historic lease liabilities, or a period of poor trading. The key question is whether the underlying business, stripped of its historic debt, is capable of generating sufficient cash flow to fund a creditor repayment plan while continuing to meet its ongoing obligations.
A CVA may be suitable if your company:
The CVA Process: Step by Step
The CVA process follows a structured statutory timeline. Understanding each stage helps directors plan effectively and engage with their insolvency practitioner productively.
Engagement & Assessment
You engage a licensed insolvency practitioner as nominee. They assess the company's financial position, viability, and the likely creditor response.
Proposal Preparation
The nominee prepares a detailed CVA proposal, including a statement of affairs, cash flow projections, and the proposed repayment terms.
Creditor Vote
Creditors are given at least 14 days' notice and vote on the proposal. 75% approval by value is required. Shareholders must also approve by simple majority.
Implementation
If approved, the CVA supervisor (usually the same practitioner) oversees the monthly contributions and distributes funds to creditors.
Completion
Once all agreed contributions have been made, the CVA is completed and the company is released from the arrangement.
Advantages of a CVA
The CVA is one of the most director-friendly formal insolvency procedures available. Key advantages include the ability to continue trading and retain control of the business, the binding effect on all unsecured creditors (including those who voted against), protection from creditor legal action during the arrangement, the potential to write off a significant portion of unsecured debt, and the preservation of the company's trading relationships and reputation compared to liquidation.
Risks and Limitations
A CVA is not without risk. If the company fails to meet its monthly contributions, the CVA may fail and the company could enter administration or liquidation. Secured creditors (such as banks with a fixed charge over assets) are not bound by a CVA and must be dealt with separately. Additionally, a CVA is a matter of public record and will appear on the company's credit file, which may affect its ability to obtain credit during the arrangement period.
It is also important to note that a CVA does not address the personal liability of directors for any personal guarantees they have given. Directors should take separate advice on their personal position before proceeding.
CVA vs Other Insolvency Options
| Feature | CVA | Administration | CVL |
|---|---|---|---|
| Company continues trading | ✓ Yes | Possible | ✗ No |
| Directors retain control | ✓ Yes | ✗ No | Limited |
| Binding on all unsecured creditors | ✓ Yes | N/A | N/A |
| Protects from creditor action | ✓ Yes | ✓ Yes | N/A |
| Suitable for viable businesses | ✓ Yes | ✓ Yes | ✗ No |