What is a Company Voluntary Arrangement?
A CVA is a formal, legally binding agreement between an insolvent company and its creditors. The company proposes to repay a portion of what it owes over a fixed period – typically three to five years – from future trading profits. If creditors representing 75% or more of the total debt value vote in favour, the CVA is approved and all creditors are bound by its terms, including those who voted against.
The CVA is governed by the Insolvency Act 1986 and must be supervised by a licensed insolvency practitioner throughout its term. Once approved, it provides the company with legal protection from creditor action while the arrangement is being performed. The company continues trading, the directors retain control, and the business has the breathing space it needs to recover.
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How the CVA Process Works
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Free Clarity Consultation
We review the company’s financial position, trading performance, and creditor profile. We assess whether a CVA is viable and what the proposal would need to look like to achieve creditor approval. If a CVA is not the right route, we will tell you clearly and explain what the alternatives are.
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Proposal preparation
We prepare a detailed CVA proposal setting out the company’s financial position, the causes of the insolvency, the proposed monthly contributions, the duration of the arrangement, and the estimated return to creditors. The proposal must demonstrate that creditors will receive more through the CVA than they would in an immediate liquidation.
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Creditor meeting and vote
Creditors are given at least 14 days’ notice of the proposal and invited to vote. The CVA is approved if creditors representing 75% or more of the total value of claims vote in favour. Shareholders also vote, requiring a simple majority. Once approved, all creditors – including those who voted against – are bound by the terms.
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Trading and monthly contributions
The company continues trading under the directors’ management. Monthly contributions are made to the licensed insolvency practitioner acting as supervisor, who distributes them to creditors in accordance with the approved proposal. Compliance is monitored and the arrangement reviewed annually.
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Completion and debt write-off
On successful completion of the arrangement – typically after three to five years – any remaining balance of the debts included in the CVA is formally written off. The company emerges from the process on a clean financial footing and continues trading.
CVA and HMRC Debt
HMRC is often the largest creditor in a CVA proposal, which means their position on the vote is critical. If HMRC votes against, achieving the 75% threshold becomes significantly harder.
HMRC will consider supporting a CVA where the proposal demonstrates a genuine improvement on the liquidation outcome, the company has a credible trading forecast, and ongoing tax obligations during the CVA period will be paid in full and on time. They will not support a CVA where they believe the company will simply accumulate further tax arrears during the arrangement.
We have experience negotiating with HMRC on CVA proposals and will give you an honest assessment of the realistic prospects of HMRC support before the proposal is submitted. A CVA that is unlikely to achieve HMRC approval is not worth pursuing – it is better to know that early and consider the alternatives.
CVA vs CVL – How to Decide
The choice between a CVA and a CVL comes down to whether the business is worth saving.
A CVA makes sense where the company has a profitable trading operation that can generate sufficient cash flow to fund the arrangement and recover over time – the debt is the problem, not the business. A CVL makes sense where the business itself is not viable, where trading losses are structural rather than cyclical, or where the creditor base makes a 75% approval threshold unrealistic.
Both procedures ultimately deal with the company’s debts. A CVL writes them off immediately through liquidation; a CVA writes off the remaining balance on completion of the arrangement. The difference is what happens to the business in between. We have no interest in recommending a CVA where a CVL is the cleaner and more achievable outcome – and we will tell you honestly which applies to your situation.
CVA Costs and Fees
Fees are fixed and transparent with no hidden extras. You will know the cost before you commit to anything. The fee covers preparation of the CVA proposal, the creditor process, and the role of supervisor throughout the arrangement.
