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Company Voluntary Arrangement (CVA) explained: step-by-step Guide
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What is a CVA and is it right for my business?
A CVA is an option for companies in financial difficulty. It is a legally binding agreement with the company’s creditors to allow a proportion of debts to be repaid over a specified period.
75% of the creditors by value must agree to this process, and if so, it can be one of the best ways for a business to recover and thrive after being burdened by historic debt. A CVA is like an IVA used by those who have personal debt. It will allow the company to repay the specified proportion of its debts over 1 to 5 years.
CVAs were introduced to UK law in 1986 and are generally preferred by the government to save a company from closure.
It is advisable to speak with an expert in this field to help you properly navigate your way through the company’s challenges.
When to consider a CVA for your business?
CVAs can be extremely useful for limited companies which find themselves with mounting debts that they are struggling to repay and, therefore, are facing insolvency. It is also often the case that the debts might be historical and are holding the company back from thriving when it would otherwise be a going concern.
You may apply for a CVA under the following circumstances:
● The company is currently insolvent
● An insolvency practitioner has determined that the business is still viable despite its current difficulties
If the latter, the company must demonstrate that it will be able to repay creditors plus honor other obligations such as salaries and VAT and still remain profitable in the future.
It is advisable to speak with an expert in this field to help you properly navigate your way through the company’s challenges.
Our focus is on you, the director - not your creditors.
We completely understand the emotional anguish company directors like you face when considering the future of your company – and the knock-on impact this can have on your personal life.
Our expert team will outline all of your options in a jargon-free, easy-to-understand way and advise you and your business on the best route forward – with the goal of protecting you and your personal assets.
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Company Voluntary Arrangement (CVA) - Frequently Asked Questions
A Company Voluntary Arrangement (CVA) is a formal, legally binding agreement between a company and the people it owes money to (its creditors). It allows the company to pay back a portion of its debts over a set period, usually between two and five years.
No. In Administration, an outside professional takes total control of the company. In a CVA, the directors stay in control of the day-to-day business. While Administration is often used when a company is already insolvent, a CVA is a proactive step taken to avoid insolvency and keep the business running.
The proposal is a detailed document that tells your “story.” It includes:
● Why the company got into financial trouble.
● A clear picture of your assets and debts.
● Cash flow forecasts showing what you can realistically afford to pay each month.
● How long the arrangement will last and how the money will be divided up.
● Evidence that this plan is better for creditors than if the company simply closed down.
The proposal is a detailed document that tells your “story.” It includes:
● Why the company got into financial trouble.
● A clear picture of your assets and debts.
● Cash flow forecasts showing what you can realistically afford to pay each month.
● How long the arrangement will last and how the money will be divided up.
● Evidence that this plan is better for creditors than if the company simply closed down.
● Stay in Charge: Directors keep running the business.
● Stop Legal Action: It prevents creditors from “winding up” the company or taking other legal steps.
● Lower Costs: It is generally much cheaper than going into full Administration.
● Privacy: Unlike some other processes, a CVA can often remain private from your customers.
● Debt Write-off: Any debt still remaining at the end of the agreed CVA period is typically written off.
● Frozen Charges: Interest and late fees on your debts are frozen the moment the CVA is agreed.
● Credit Rating: The company’s credit rating will be affected for six years.
● Bank Support: It can sometimes be difficult to get your bank to agree to the terms.
● Unsecured Debt Only: A CVA usually only covers “unsecured” creditors (like suppliers or HMRC). “Secured” creditors (like banks with a charge on your property) can still technically take action if they aren’t satisfied.
● Public Record: While more private than liquidation, the CVA is still filed at Companies House.
It typically takes between seven and ten weeks to draft the proposal, talk to creditors, and get the plan officially approved.
For a CVA to be approved, 75% (by value of debt) of the creditors who vote must say “Yes.” There is also a second vote for “connected creditors” (like directors or family members), where 50% must agree.
If the company fails to keep up with the agreed repayments, the CVA can fail. This often leads to the company being forced into “Compulsory Liquidation” (closing the business down).
Because the goal is to keep the business trading normally, staff usually don’t see any changes to their daily work. However, if the business needs to restructure to become profitable, there might be some redundancies. In those cases, employees are eligible for government redundancy payments.
HMRC is a major creditor for many businesses. They are generally supportive of CVAs and approve around 70% of the proposals they receive. They are more likely to agree if the plan is well-thought-out and the company has a history of trying to be compliant.
After a CVA is approved, there is a 28-day window where creditors can challenge the decision in court. They can only do this if they feel the process was unfair or if there was a major mistake in how it was handled.
We specialise in helping directors navigate these high-pressure moments. We offer:
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● Tailored plan unique to your situation