Call Us

Company Voluntary Arrangement

A Company Voluntary Arrangement (CVA) is a formal insolvency process agreed between a company and its creditors where a proportion of debts are often written off and the company agrees to pay back a lower proportion of the remaining debt in regular monthly instalments.

It’s a way for a company to remain trading and restructure itself to hopefully come out stronger and more profitable at the end of the process.

How does a CVA work?

A CVA is a legal agreement for the reorganisation of a company’s debts. If your company is insolvent, you could potentially look to restructure its debts by proposing a CVA.

As you would look to only offer what you could afford over an agreed period, this could mean that a percentage of your debts would be written off. Furthermore, interest and charges would be frozen once the CVA was accepted.

As it’s a formal insolvency process, you’d need to work with an insolvency practice to organise this. From our side, we’d first ascertain whether a CVA was viable, and then work with you to draft proposals to send to creditors.

Your creditors would then vote on the proposals, and as long as over 75% in value voted in favour, the CVA would be accepted and would be binding on all other unsecured creditors.


If your clients main hurdle to profit is making their monthly debt repayments in full and on time then it might make more sense to tackle these debts holistically with a CVA.

A Company Voluntary Arrangement (CVA) is a formal insolvency process agreed between a company and its creditors where, in return for a proportion of debts being written off, the company agrees to pay back a lower proportion of the remaining collective debt in those regular monthly instalments until cleared.

It’s a way for a company to remain trading and have certainty around its debt while it restructures itself to hopefully come out stronger and more profitable at the end of the process – and debt free.

Do CVAs work?

CVAs account for only a small fraction of the corporate insolvency market. This is because they often aren’t the most suitable restructuring tool.

When you are putting together CVA proposals, you must be sure to work with an insolvency practice that has taken the time to understand your business and to draft appropriate and flexible terms.

A CVA can be an excellent restructuring tool, but there are a few key questions we always look to answer when deciding suitability:

1. Is there a standout reason for the current cashflow difficulties?
2. Is there strong management in place?
3. Does the business have a clear and realistic plan moving forward?
4. Does the plan correlate with the historical figures?
5. How does the business compare against industry averages?
6. How far back does the HMRC debt stretch?
7. Are key creditors supportive?
8. Are funders supportive?

As a professional firm, we will only put forward a CVA proposal where we believe it has a fair chance of success. It is estimated that 40% of CVAs fail, so it is important when considering a CVA to understand the alternatives prior to doing so.

The CVA proposals

How do we ensure a successful CVA process?

Firstly, we closely review your company’s financial information. Based on your circumstances, we work with you to formulate an achievable repayment plan for your creditors.

This is worked out from your business’ projected profit and cashflow, any material asset disposals, seasonality or other trends, and discussions with your major creditors.

Are there different types of CVA proposals?

Yes, CVA proposals should fit around your exact business. Not only should they allow enough flexibility for future changes, but they should be built around the business’s future plans.

We go into more detail on the differing types of CVA proposals below.

Fixed contributions

In these type of CVAs, you would repay a fixed monthly amount, calculated from your cashflow projections and normally lasting 60 months (five years). An example would be a company owing £300,000 and repaying £3,000 per month over 60 months.

This would allow a significant debt write off, but the business would be committed to finding £3,000 per month for 5 years. Although this is the most popular type of CVA, it is sometimes not the best option as by being fixed, it is unlikely to have taken account of the vagaries of your business and fluctuations of its future business cycles.

These types of CVAs can work, but due to their inherent inflexibility, they are most likely to be the ones that don’t last the full agreed CVA term.

Seasonal / trend based contributions

This CVA type is based on your business repaying either variable amounts, as defined by the projected peaks and troughs for the business calendar, or flexible amounts depending upon agreed calculations based on turnover.

As with the above example, if the business owed £300,000, you could propose to repay 4% of monthly turnover, for example, allowing you greater cashflow planning. Depending on your finances, you would still be eligible for significant debt write off and because this arrangement is written with more flexible terms, the CVA is more likely to be successful.

Seasonal / trend based contributions, and / or asset release

As above, but this CVA type also allows, or has potential for releasing assets into the arrangement. This works very well where the company owners are contemplating a sale of the whole or part of the business, but need more time to organise it.

For example they may make contributions for a 12 month period on a seasonal basis, and organise the sale of a division at the end of the year. It may well be that the division sale brings the CVA to a successful conclusion at that point. In case the sale didn’t complete or was delayed, a good CVA proposal would contain a pre-agreed alternative, such as continuing to pay contributions for a further period in lieu of the expected sale proceeds.

By trying to foresee obstacles and building alternative scenarios into the proposal, the CVA has a stronger chance of success.

CVA preparation: how best to prepare your business for a CVA

Because it’s a formal insolvency process, putting forward a CVA requires an insolvency practitioner to agree that your CVA has a fair chance of being accepted and is therefore recommended.

As insolvency practitioners, in order to do this, we need to see evidence that you have gone through each of these steps:

Stage 1. Cost analysis review and implementation

Prior to a restructuring, it’s usual for most of your time to be taken up with cash management, and ‘firefighting’. Now you need to make time for cost analysis and implementation.

Review all aspects of your business to see where savings can be made.

This should include:

  • Leases
  • Suppliers
  • Finance agreements
  • Staffing
  • Directors / shareholders

If you can bring finance agreements or leases to an end, or find less costly premises, then now is the time to do that. Bear in mind that any shortfall costs or termination charges will be a debt within the CVA, which will limit the effect on cashflow.

A word of warning though – make sure you check for any personal guarantees before ending leases or finance agreements. If you have given any guarantees, a plan will need to be made to deal with them.

What happens after a CVA is accepted?

Other than the immediate relief you’ll undoubtedly feel, what are the other effects you need to be aware of?

Immediate effects of a CVA

You remain in control of your business and your business cashflow will improve.

Employees’ rights remain as they were and your customers will not be formally informed of the CVA (although, depending on your industry, you may find that some rumours persist).

You’ll also feel the benefit of the CVA’s legal bind on your creditors.

From the point of acceptance:

  • All unsecured creditors will be bound by the terms of the CVA
  • Your creditors’ interest and charges will be frozen
  • Any ongoing legal actions will cease
  • You’ll only make payments for the unsecured debt from that date as per the terms of proposal

What happens to VAT within a CVA?

As with other creditors, HMRC will be bound into the arrangement. It is therefore unable to charge further interest and penalties on the money you owe from the meeting date.

However, as your various debts with HMRC are usually accruing on a daily basis, once it has received
notice of the acceptance of your CVA, it will issue a VAT return for the period to the date of the meeting.

It’ll also issue a further VAT return from the period after the meeting until your quarter end. The pre-CVA meeting claim will form part of your CVA debt, and you’ll be expected to pay post-CVA returns on time, according to the usual timescales.

What does my CVA supervisor do?

If you’re working with us, we’ll designate an experienced supervisor to your case who will write to you clearly laying out your agreed obligations.

The supervisor will:-

  • Collect the contributions or assets as per your proposal
  • Agree the creditor’s claims and pay dividends to the creditors
  • Review the company’s finances at the agreed time interval

If you and/or your supervisor find that your arrangement needs to materially change, they’ll call a new meeting of creditors and propose the variation to the arrangement.  

If this is accepted by your creditors, the arrangement will continue as per the agreed proposal and the new variation.

Bringing the arrangement to an end

Your CVA is brought to a successful conclusion once you have made all expected payments into the arrangement, and your supervisor has paid all outstanding dividends to your creditors.

You are then issued with a certificate of completion, and a final report is filed at Companies House.

Hopefully this will help you prepare for the months and years ahead, however, if you would like to talk to us about any of the above in more detail, contact one of our business rescue experts directly.

Have we answered all your questions about CVAs? If we’ve missed anything, or you would like to discuss this in more detail, get in touch with one of our business rescue experts directly.

If you are wondering how much a CVA might cost you, try our online calculator.

Frequently Asked Questions about Company Voluntary Arrangements
How much does a CVA Cost?

It depends on the size of your company and how much you owe to other businesses but usually will be somewhere between £3,000 and £10,000.

Can a CVA stop bailiffs?

Yes but only once it has been accepted by creditors. If the bailiff action is imminent or occurred before the CVA is accepted, we can negotiate with them on your behalf.

Can a CVA stop a winding-up petition?

Yes but only when the CVA has been agreed. If the petition is due to be heard before the CVA has been accepted we can ask for an adjournment of the petition.

Will my business remain open with a CVA?

Yes. Voluntary arrangements are a means of restructuring whilst a business continues to trade.

However, if a winding-up petition has been issued prior to a CVA being accepted it is recommended that a validation order is applied for, otherwise directors can be held personally responsible for any payments made to creditors in the period that the petition was issued should the company be liquidated.

Will a CVA be automatically accepted?

The CVA has to receive the backing of 75% of your creditors. If it passes this threshold then it is passed and is binding on all creditors.

How much will I have to pay back?

The amount varies depending on how much you owe and how much your business returns.

A profit and loss and cash flow projections will be prepared to determine your contribution.

Can I work out a CVA myself?

No. The CVA legally requires a qualified insolvency practitioner to administer it and oversee the process.

How long does a CVA last?

A CVA usually lasts about five years (60 months) but depending on circumstances could be shorter or longer than this.

Can I still use my business bank account?

Yes. Your business bank account remains open and active.

Will I need to apply for a validation order before I get a CVA?

You should apply for a validation order if a winding-up petition has been issued against your company, and it is your intention to propose a CVA and continue trading.

The validation order will allow you to continue paying money to creditors, without falling foul of insolvency legislation. We can assist with a validation order application if required.

How do you calculate how much my company pays into the CVA?

Profit & loss and cash flow projections will be prepared for your company.  

From this and your business’ individual circumstances, we’ll determine how much your company can afford to pay at different times of the year.

How will it affect my personal guarantees?

When negotiating with your creditors, we will reach agreement with any companies that you have outstanding personal guarantees with.  

This may involve no further payment other than the CVA contribution, although on some occasions, you may need to agree a top up from personal funds.

What happens to my employees in a CVA?

Employment rights are not affected by voluntary arrangements.

If, at the time of setting up a CVA, there are outstanding payments due to staff that have left the company, their claims can be included within the CVA, and they may be able to claim from the national insurance fund, after which the fund would be a creditor in the CVA instead.

Are my customers informed of the CVA?

No.  We write to your creditors and notice of the CVA is filed at Companies House, but we do not contact any of your customers nor is it advertised.

Are directors investigations carried out?

No.  Under a CVA, your business continues to trade, and as such there is no need to carry out investigations into the directors’ conduct.

Do I have to use an insolvency practice?

Yes.  A CVA must be implemented and overseen by a licensed insolvency practitioner.

How long do CVAs normally last?

Usually five years.

However, this is not set in stone, and depends on the level of debt, and the amount that your company can afford to put into the arrangement.

What happens if I have rent arrears?

We would look to reach agreement with your landlord in the CVA as well.

This would include taking account of whether your business intends to continue from the same premises in the future.

How does the voting at the creditors meeting work?

Once the proposals have been sent to creditors, we negotiate with creditors on your behalf.

Each unsecured creditor can vote for the value of their debt.

Over 75% of votes by value must be in favour of the CVA for it to be accepted. Creditors can also suggest modifications to the proposal.

Can I continue using my existing bank facilities?

Yes, your day to day trading doesn’t change.

Separate to your normal business, you make the CVA payments to the CVA supervisor, who distributes the monies to your creditors.

Getting in touch with the Expert…

This field is for validation purposes and should be left unchanged.