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Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement is a formal insolvency process that allows an insolvent company to restructure its debts while continuing to trade.

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What is a Company Voluntary Arrangement?

A Company Voluntary Arrangement is a formal insolvency process that allows a company to reach an agreement with its creditors to repay debts over time. It is initiated by the Directors, approved by creditors, and supervised by a licensed Insolvency Practitioner.

The goal of a CVA is to help a financially distressed company restructure its debts while continuing to trade. It is typically used when the underlying business remains viable but needs time to stabilise cash flow and deal with creditor pressure.

Once approved, the company makes agreed repayments to creditors over a fixed period, usually between three and five years, while continuing normal business operations.

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John Bell

Senior Partner | Licensed Insolvency Practitioner

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Is a Company Voluntary Arrangement right for my company?

A company may consider a Company Voluntary Arrangement if it is experiencing financial pressure but still has a viable underlying business.

Signs that a CVA may be appropriate include:

  • Mounting creditor pressure
  • HMRC arrears or tax debts
  • Cash flow problems despite strong sales
  • Missed supplier payments
  • Temporary financial difficulties following a contract loss or unexpected expense.

A CVA is typically used when the company cannot repay its debts immediately but could repay a portion over time if given breathing space.

If the business has no realistic future, other options such as Creditors’ Voluntary Liquidation (CVL) may be more appropriate.

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How does a Company Voluntary Arrangement work?

A CVA insolvency procedure allows a company to negotiate a structured repayment plan with creditors.

Directors remain in control of the business while the company continues trading. Instead of facing immediate legal action, creditors agree to receive repayments based on what the company can realistically afford.

The Insolvency Practitioner prepares a formal proposal outlining:

  • The company’s financial position
  • How much debt can be repaid
  • The repayment schedule
  • How the business will recover financially.

Creditors then vote on the proposal.

For a CVA to be approved:

  • 75% of creditors (by value of debt) must vote in favour
  • No more than 50% of unconnected creditors can vote against.

If approved, the CVA becomes legally binding, and the company begins making the agreed payments.

How does the CVA process work?

The Company Voluntary Arrangement process follows a structured legal framework set out under UK insolvency law.

1

Step 1: Seek professional advice

You speak with a licensed Insolvency Practitioner who reviews your company’s financial position. They will assess your debts, cash flow, and overall viability to determine whether a Company Voluntary Arrangement could work for your business.

2

Step 2: Prepare the CVA proposal

If a CVA is suitable, the Insolvency Practitioner works with you to prepare a formal proposal. This outlines how much your company can realistically afford to repay and includes financial forecasts showing how the business will continue trading.

3

Step 3: Proposal submitted to creditors

Your CVA proposal is sent to creditors along with supporting financial information. This allows them to review the repayment plan and understand how the company intends to deal with its debts.

4

Step 4: Creditor vote

Creditors then vote on the proposal. For the CVA to be approved, at least 75% of voting creditors (by debt value) must support the arrangement.

5

Step 5: CVA approval

If the required majority of creditors agree, the CVA becomes legally binding on all unsecured creditors. This means creditors included in the arrangement cannot take further legal action as long as the terms are followed.

6

Step 6: CVA supervision

The Insolvency Practitioner becomes the Supervisor of the CVA and oversees the arrangement. They ensure the agreed payments are made and report to creditors during the repayment period.

7

Step 7: Completion of the CVA

Once you have completed the agreed repayment plan, the CVA is successfully concluded. Any remaining unsecured debts included in the arrangement are written off, allowing your business to move forward on a stronger financial footing.

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The CVA timeline: How long does a Company Voluntary Arrangement last?

A Company Voluntary Arrangement typically lasts between three and five years.

The initial stages of preparing and approving the CVA proposal normally take two to four weeks, depending on the complexity of the company’s finances.

Once approved, the company begins making monthly or quarterly payments to creditors through the Insolvency Practitioner.

If the company successfully completes the arrangement, the remaining unsecured debt included in the CVA is written off.

Benefits of a CVA

A Company Voluntary Arrangement can offer several advantages for businesses facing financial difficulties.

Key benefits include:

Continue trading:

The company can continue operating during the CVA. This allows the business to maintain customer relationships, generate income, and stabilise its finances while repaying creditors.

Director control retained:

Unlike liquidation or administration, Directors usually remain in control of the day-to-day running of the business. The Insolvency Practitioner acts as the Supervisor of the arrangement rather than taking over management.

Reduced creditor pressure:

Once the CVA is approved, unsecured creditors included in the arrangement must follow its terms. This prevents further legal action such as winding-up petitions or debt recovery proceedings.

Affordable repayment plan:

The repayment plan is based on what the business can realistically afford to repay over time, helping the company manage its debts in a structured and sustainable way.

Potential debt reduction:

Creditors may agree to accept a reduced repayment because the alternative could be liquidation, where they may recover less. This can significantly reduce the overall debt burden.

CVA vs other insolvency options: Which procedure is correct?

Directors usually consider several formal options when a company becomes insolvent, including a Company Voluntary Arrangement, Administration, and Creditors’ Voluntary Liquidation (CVL).

A CVA is typically used when the business is still viable but needs time to repay its debts. It allows the company to continue trading while making structured repayments to creditors over an agreed period.

Administration is designed to protect a company while exploring a rescue or sale. An Administrator takes control of the business and attempts to restructure or sell it to repay creditors.

A Creditors’ Voluntary Liquidation is used when the company has no realistic future. It provides a formal process for closing the company, selling its assets, and repaying creditors where possible.

Choosing the right option depends on the company’s financial position and whether the business can realistically recover.

Comparing CVA, Administration and CVL

Feature CVA Administration CVL
Purpose Repay debt over time Rescue or restructure Close company
Suitable for insolvent firms Yes Yes Yes
Stops creditor action Yes Yes Yes
Directors stay in control Yes (under supervision) No No
Typical duration3 to 5 years Typically within 12 months 6 to 12 months

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Why choose Clarke Bell for your Company Voluntary Arrangement?

When a company enters a Company Voluntary Arrangement, a licensed Insolvency Practitioner must be appointed to prepare and supervise the arrangement. Their role is to work with Directors, negotiate with creditors, and ensure the process complies with insolvency law.

Clarke Bell has been helping company Directors deal with financial difficulties for over 30 years. We provide clear advice, practical solutions, and a transparent service.

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FAQs about Company Voluntary Arrangements

No. A Company Voluntary Arrangement is a business rescue process that allows a company to repay its debts over time while continuing to trade. Liquidation is different because it closes the company and sells its assets to repay creditors.

A CVA can be a good option if a company is struggling with debt but still has a viable business. It allows the company to restructure what it owes, reduce creditor pressure, and repay debts through an affordable repayment plan.

Yes. A Company Voluntary Arrangement becomes legally binding once creditors representing at least 75% of the company’s debt approve the proposal. Once approved, all unsecured creditors must follow the terms of the agreement.

If creditors reject a CVA proposal, the arrangement cannot proceed. Directors may then need to consider other insolvency options such as administration or a Creditors’ Voluntary Liquidation.

Most Company Voluntary Arrangements last between three and five years. During this period, the company makes regular payments to creditors based on what the business can afford.

Yes. A Company Voluntary Arrangement is recorded on the company’s public record at Companies House and also appears on the Insolvency Register.

Further reading on Creditors’ Voluntary Arrangement

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Resolve company debt with Clarke Bell

A Company Voluntary Arrangement can help viable businesses deal with creditor pressure, restructure their debts, and continue trading.

Clarke Bell has been helping company Directors deal with financial difficulties for over 30 years. Our licensed Insolvency Practitioners provide clear advice and a professional, compliant service to help you find the right solution for your company’s financial position.

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