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What is a Company Voluntary
Arrangement (CVA)?
A CVA is a formal insolvency procedure that allows a company to reach a binding agreement with its creditors to repay debts over time while continuing to trade. Directors remain in control. At least 75% of creditors by value must approve it. This guide explains what a CVA is, how it works, and whether borrowing is possible during one.
How a CVA works
A CVA is proposed by the company’s directors, with a licensed insolvency practitioner acting as nominee. The proposal sets out how the company will repay its debts — over what timescale, at what rate, and with what restrictions on future trading. Creditors vote on the proposal; if 75% by value approve, all unsecured creditors are bound, including those who voted against.
Once approved, the company continues to trade. The directors remain in control — but the IP becomes supervisor and monitors compliance. The company makes regular payments to the supervisor, who distributes them to creditors. At successful completion, the remaining debts bound by the CVA are discharged.
This is not legal advice. Directors considering a CVA should take immediate advice from a licensed insolvency practitioner or specialist solicitor.
CVA vs administration vs liquidation
| Feature | CVA | Administration | Liquidation |
|---|---|---|---|
| Directors in control? | Yes | No (administrator takes control) | No (liquidator takes control) |
| Company continues trading? | Yes | Usually temporarily | No |
| Moratorium on creditor action? | No (limited protection only) | Yes (automatic) | N/A |
| Binds all unsecured creditors? | Yes (if 75% approve) | No | N/A |
| Can company borrow new money? | Only with supervisor consent | Only with administrator consent | No |
Five steps if you are considering a CVA
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Assess whether the company is insolvent or imminently insolvent
A CVA is only appropriate for an insolvent company — one that cannot pay its debts as they fall due or whose liabilities exceed its assets. If the company has a temporary cash flow problem but is fundamentally viable, other options (including short-term finance) may be more appropriate. An honest assessment of trading viability is essential before proceeding. -
Instruct a licensed insolvency practitioner to act as nominee
Only a licensed insolvency practitioner can act as nominee and supervisor for a CVA. The nominee reviews the company's financial position, prepares a report to creditors, and assesses whether the proposal is viable. Directors cannot run a CVA without a licensed IP — there is no DIY route. -
Prepare a realistic repayment proposal
The CVA proposal sets out how the company will repay its debts, over what timescale, and at what rate. It must be supported by a trading forecast showing the company can generate sufficient cash to make the payments while continuing to operate. Creditors will scrutinise the forecast — proposals that rely on optimistic assumptions are more likely to fail at the creditor vote or after implementation. -
Obtain creditor approval
The proposal is sent to all creditors, who vote within a set period. The CVA requires approval by at least 75% by value of the creditors who vote. Secured creditors are not bound by the CVA unless they agree separately. If the threshold is not met, the company does not enter a CVA and must consider other options. -
Comply with the CVA terms throughout the arrangement
Once approved, make every agreed payment to the supervisor on time. Keep trading within the restrictions set out in the arrangement (including debt incurrence limits). Communicate proactively with the supervisor if trading conditions change materially. Successful completion of the CVA discharges the remaining debts bound by it — rebuilding the company's credit standing from a clean slate.
CVA questions
What is a Company Voluntary Arrangement (CVA)?
A CVA is a formal insolvency procedure under the Insolvency Act 1986 in which a company reaches a binding agreement with its unsecured creditors to repay some or all of its debts over time, at a reduced rate, or in a modified form. It is proposed by the directors and supervised by a licensed insolvency practitioner (the nominee/supervisor). At least 75% by value of the creditors who vote must approve it. Once approved, it binds all unsecured creditors — including those who voted against it.
Can a company in a CVA keep trading?
Yes — the whole point of a CVA is to allow the company to continue trading while addressing its debt. The directors remain in control (unlike administration or liquidation). The company trades normally, and makes agreed payments to the CVA supervisor who distributes them to creditors according to the plan. A CVA is not a moratorium on all legal action, but new claims from creditors who voted are bound by the arrangement.
Can a company in a CVA borrow?
It depends on the specific terms of the CVA and the lender's assessment. CVAs typically restrict the company from incurring additional debt above a certain threshold without the supervisor's consent. From a lender's perspective, a company in a CVA is in a formal insolvency process — this will appear on its credit record and will be noted during any credit assessment. Credicorp does not lend to companies in active CVAs. Directors who wish to borrow after exiting a successfully completed CVA should apply with evidence that the arrangement has been discharged.
What happens if the company fails to comply with the CVA?
If the company fails to make the agreed payments or breaches the terms of the CVA, the supervisor can petition to wind up the company or place it into administration. A failed CVA typically results in liquidation — the outcome the CVA was designed to avoid. Directors should not enter a CVA unless they have a realistic, independently tested plan to meet the payments from trading cash flow.
What is the difference between a CVA and administration?
In a CVA, the directors remain in control of the company and the arrangement is binding only on unsecured creditors. In administration, an insolvency practitioner (the administrator) takes control of the company, and there is an immediate moratorium on all legal action by creditors. Administration is typically used when a company needs immediate protection from creditor action while a rescue plan is implemented — a CVA does not provide that immediate moratorium.
Borrow before there is a problem.
Short-term working capital finance helps companies bridge cash flow gaps before they become structural problems. Apply while the company is financially healthy.