Last Updated: 11/11/2025
In short
It is a statutory contract between a company and its creditors. Like any contract it can be highly flexible to suit the circumstances. For it to bind all creditors it must be approved by 75% in value of creditors that bother to vote. Often the terms of the contract involve freeing interest and allowing the company to pay back only part of its debts over a period of three to fives years.
More detail
When would you use a CVA?
When it is insolvent but the business is viable (once restructured), and you can pay creditors more than they would get in a liquidation. It is a really good way of restructuring the debt, plus it keeps the company under the control of the directors. Using other insolvency procedures, such as liquidation or company administration, would mean that directors lose control. The purpose of a CVA is to help the company survive, avoiding liquidation or closure.
Advantages
- Company may be able to continue trading under the control of current directors/shareholder
- Property leases, hire purchase and other agreements remain the company’s name
- The company can keep any qualifications or certifications it needs.
- Creditors should be back more money
- It can be less disruptive for staff
- No investigation into what went wrong
- No conduct report submitted to the Insolvency Service about the directors
Disadvantages
- 75% of creditors have to agree
- It adversely affects credit rating and many suppliers may insist on cash on delivery of goods
- You may be forced to accept certain modifications to your proposal in order to achieve creditor agreement. This could include for example no dividends during the period of the CVA is in place
- It you miss a monthly payment instalment the arrangement may fail
- A liquidation or pre-pack administration may provide a cleaner restart
If you wish to discuss how a company voluntary arrangement could help your business survive or need general insolvency advice the earlier you talk to us the better as you may have more options. Call us today on 0800 331 7417 or complete the form below.
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