What is a company voluntary arrangement (CVA)?
A company voluntary arrangement (CVA) is a legally binding agreement between an insolvent but potentially viable company and its creditors to repay some or all of what it owes over a set period, usually three to five years, while the company carries on trading. The directors propose it with the help of a licensed insolvency practitioner, and it takes effect once creditors holding at least 75% by value of the debt that votes approve it. A CVA can give a viable business time to recover without the threat of creditor action, but it is not suitable for every company in difficulty.
Last Updated: 18/09/2026
What is a company voluntary arrangement?
A CVA is a statutory contract between a company and its creditors, made under Part I of the Insolvency Act 1986. Like any contract it can be flexible: the terms commonly freeze interest and allow the company to repay only part of its debts over an agreed period, typically three to five years. It is supervised throughout by a licensed insolvency practitioner, and it lets the company keep trading under the control of its existing directors.
The point of a CVA is to give a company that is insolvent, but whose underlying business is still viable once restructured, a way to deal with its debts. In most cases creditors agree to it because a CVA offers them a better return than they would receive if the company were simply wound up. A CVA deals with the company’s unsecured debts and does not write off any liabilities that arise after the arrangement is approved. When the arrangement is completed, the company is released from its CVA debts. For a shorter plain English summary, see our answer on what a company voluntary arrangement is.
Who proposes a CVA, and who approves it?
The directors propose a CVA, usually with a licensed insolvency practitioner helping to formulate and draft the proposal. Creditors then vote on it, and the arrangement is approved if at least 75% by value of the creditors who vote agree to it. The company’s shareholders also vote, and once a CVA is approved it binds every unsecured creditor, including those who voted against it or did not vote at all.
There is a second safeguard in the vote. If creditors representing more than 50% by value of the unconnected creditors vote against the proposal, it cannot be forced through, even where the 75% threshold is met. This stops an arrangement being approved purely on the strength of votes from creditors connected to the company, such as its directors or their associates.
A CVA cannot affect the rights of secured or preferential creditors without their consent. A bank holding a debenture, for example, usually stands aside and lets the unsecured creditors decide, because it expects to continue to be paid as normal. HMRC votes like any other creditor; note that some taxes the company collects, such as PAYE, employee National Insurance and VAT, rank as secondary preferential debts, with the rest of an HMRC claim unsecured. In our experience HMRC is generally supportive of a realistic proposal, and runs a specialist Voluntary Arrangement Service department that is experienced at assessing CVAs.
When is a CVA the right option, and when is it not?
A CVA suits a company that is insolvent because of a temporary or fixable problem but still has a viable business underneath. It is not the right tool for a company with no realistic future, where the figures only work on paper or the underlying business is no longer sound. A CVA does not fix a business that is fundamentally loss making; it buys a viable one time to recover.
In broad terms, a CVA may be appropriate:
- when a company is struggling under the burden of its debts but is still a viable business;
- when the directors want to keep control of a viable company so it can trade out of its difficulties;
- when creditors can be reassured that the repayment proposals are realistic and offer a better outcome than Administration or Liquidation.
CVAs are usually only suitable for companies whose business has not been too badly damaged by a prolonged period of financial difficulty. Seeking advice early can make the difference between rescue and a terminal insolvency procedure, because the more cash and goodwill a business still has, the more options remain open. If the business is no longer viable, a creditors’ voluntary liquidation or company administration may be the more suitable routes.
How does a CVA work, step by step?
A CVA is drafted with a licensed insolvency practitioner acting as an advisor, reviewed (usually) by that same licensed insolvency practitioner acting as nominee and then put to creditors for a vote, and then if approved run by that practitioner as supervisor. The company usually makes agreed contributions, usually monthly, which the supervisor distributes to creditors over the life of the arrangement, although it can be used to conduct a trade on and a sale of assets. From first instruction to approval typically takes around a month if all the information is readily available.
The proposal is prepared by the directors with the prospective nominee’s help and sets out the company’s financial position and what it can realistically afford to pay. Creditors must be given at least 14 days’ notice of the decision procedure, and in practice the proposal is usually circulated around three weeks before the vote to allow for postage.
Once the practitioner takes over as supervisor, their role is to collect the contributions or proceeds from asset realisations, distribute them to creditors and make sure the company keeps to its side of the bargain. The contributions usually come from future trading profits, from a controlled sale of assets, or from a combination of the two. How much creditors receive depends on what the company can afford: a business with substantial assets or good trading prospects may repay creditors in full over time, while one with few assets and modest profits may repay a lower amount in the pound.
If the company does not keep to the terms, for example by missing the agreed contributions, the arrangement can fail. A failed CVA often leads to liquidation or administration, and the supervisor is usually required to petition for the company to be wound up if the arrangement breaks down. This is why a realistic proposal is important: arrangements tend to fail when the original projections were too ambitious, or when trading conditions change over a three to five year period.
CVA, administration or liquidation: how does a CVA compare?
The defining feature of a CVA is that the directors stay in control of the company. In a company administration an administrator takes over the running of the business, and in a creditors’ voluntary liquidation the company stops trading and is wound up by a liquidator. A CVA is the only one of the three that is designed to keep a viable company trading under its existing management.
Administration places the company under the control of a licensed insolvency practitioner and brings a statutory moratorium that protects it from creditor action while a rescue or sale is arranged. It is often the right answer where the business needs protection quickly, or where a quick sale of the business or its assets is the realistic outcome. A CVA, by contrast, has no automatic moratorium, so it depends on creditors accepting the proposal rather than on court protection while it is being agreed.
Liquidation marks the end of the company. A creditors’ voluntary liquidation is used when the business is no longer viable and the directors and creditors agree to wind it up, whereas a CVA is used when the business can be saved. Because the directors continue to run the business throughout a CVA, the professional costs are often lower than those of administration or liquidation, where an office holder takes over the company. Which procedure fits depends on the state of the business and the attitude of its creditors, and that is a judgement to take with a licensed insolvency practitioner. You can read more about the options on our business rescue page.
What does a CVA mean for directors, employees and contracts?
Directors keep control of the company throughout a CVA, which is the main reason many choose it over administration or liquidation. Employees usually continue to be employed because the company carries on trading, and contracts such as leases, hire purchase and supply agreements generally stay in the company’s name. A CVA can include restructuring, so some of these arrangements may change as part of the plan.
The directors’ duties remain the same during a CVA. They must keep acting in the interests of creditors and run the company in line with the arrangement, and the supervisor monitors that they do. A CVA does not remove a director’s personal liability under any personal guarantee they have given, because a guarantee is a separate contract between the director and the lender. For directors weighing their wider exposure, our Director’s Guide to Company Insolvency sets out the duties and risks in more detail.
Because the company keeps trading, a CVA can protect jobs and preserve the value in customer relationships, leases and any licences or accreditations the business needs to operate, all of which stay with the company rather than being lost on a winding up. Where part of the problem is an unaffordable cost base, the proposal can build in changes, but those need to be planned with advice rather than assumed.
Frequently asked questions about CVAs
What is the difference between a CVA and administration?
In a CVA the directors stay in control of the company and propose a deal to repay either in part or in full creditors over time while continuing to trade. In administration, a licensed insolvency practitioner takes over the company, with the protection of a statutory moratorium, to rescue it or to sell the business or its assets. A CVA depends on creditors approving the proposal; administration gives immediate court protection but removes the directors from day to day control.
Does a CVA affect my company’s credit rating?
Yes. A CVA is a formal insolvency procedure, so it is recorded at Companies House and shows on the company’s credit file, which usually makes credit harder and more expensive to obtain while the arrangement is in place. The trade-off is that the company continues to exist and trade, which a liquidation would not allow. Many businesses rebuild their credit profile over time once the CVA is completed.
Can creditors reject a CVA?
Yes. Creditors vote on the proposal, and it is only approved if at least 75% by value (and at least 50% of non-associated creditors by value) of those who vote agree to it. If it does not reach that threshold it can be rejected, although it is sometimes revised and put back to creditors. A proposal is far more likely to be accepted when the repayment terms are realistic and offer creditors a better return than they would get from winding the company up.
What happens if the company cannot keep up with the CVA payments?
If the company misses its agreed contributions, the arrangement can fail. The supervisor will usually try to agree a variation with creditors first if the difficulty looks temporary, but a CVA that breaks down often ends in liquidation or administration, and the supervisor is generally required to petition to wind the company up. This is why the contributions need to be set at a level the business can realistically sustain from the outset.
Does a CVA stop a winding up petition or other creditor action?
Once a CVA is approved, the creditors bound by it cannot pursue those debts or take legal action for them while the company keeps to the terms. A CVA does not bring an automatic moratorium while it is only being proposed, so it does not by itself stop a winding up petition that is already in progress; situations of that kind need immediate advice, because the timing and the order of steps matter. A licensed insolvency practitioner can tell you quickly whether a CVA can still be put in place.
Speak to a licensed insolvency practitioner
This page is general information, not advice for your company’s specific situation. Whether a CVA is the right option, and whether it can be made to work, depends on the detail of your finances, your creditors and your business, and that always needs a conversation with a licensed insolvency practitioner.
McTear Williams & Wood has experienced licensed insolvency practitioners regulated by the ICAEW. If your company is under pressure from its debts, book free initial advice or call us on 0800 331 7417 to talk through your options in confidence. We will give you a true picture of where the company stands and set out the routes open to you, including whether a CVA, administration, liquidation or another form of rescue fits best. There is no charge for that first meeting; charges only apply if and when terms of engagement have been agreed.
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