A Company Voluntary Arrangement (CVA) is a powerful tool for UK businesses facing insolvency. Chris Worden explains how a CVA works, its benefits, and how to make it succeed.
Summary
- CVA lets you restructure debts and keep trading
- Works for small and large businesses
- Act early—before creditor action
- Director stays in control
- Requires realistic repayment plan
- 75% creditor approval needed
- Can write off a portion of debts
What is a CVA?
A CVA (Company Voluntary Arrangement) is a legally binding agreement between your company and its creditors to repay all or part of its debts over a set period, usually up to five years. The director remains in control, and the process is overseen by an insolvency practitioner.
Benefits of a CVA
- Stops legal action and creditor pressure
- Freezes interest and legal proceedings
- One affordable monthly payment
- Protects jobs and reputation
- Can write off a significant portion of debt
- Seen as a company rescue, not a failure
How Does a CVA Work? Step-by-Step
- Speak to an insolvency practitioner—Review finances, creditors, and cash flow forecasts.
- Build your proposal—Practitioner drafts a plan showing debts, creditors, and affordable repayments.
- Negotiate with creditors—Early communication increases approval chances.
- Creditor vote—75% (by debt value) must approve for the CVA to become binding.
- Implementation—Make monthly payments; practitioner distributes funds and files reports.
- Completion—After final payment, remaining debts are written off and the company exits insolvency.
Who is a CVA Suitable For?
- Businesses with predictable cash flow but short-term issues
- Companies with valuable contracts or licences to protect
- Retailers, construction firms, service businesses with HMRC arrears
- Firms where the business model is sound but debts are overwhelming
Common Reasons CVAs Fail
- Unrealistic repayment offers
- Poor communication with creditors
- Late tax returns or filings
- Using a CVA as a delaying tactic
- Directors not sticking to the agreed plan
Key Takeaways
- CVA can rescue a business if used early and correctly
- Director stays in control throughout
- Requires honest cash flow forecasting and creditor engagement
- Not suitable for every business—seek professional advice
- Chris Worden and Director First can guide you through the process
FAQs
- What is a CVA?
- A Company Voluntary Arrangement is a legal agreement to repay company debts over time while continuing to trade.
- Who can propose a CVA?
- Company directors, with the help of an insolvency practitioner, can propose a CVA to creditors.
- How much debt can be written off in a CVA?
- It varies, but creditors may agree to write off a significant portion—sometimes up to 60% or more.
- What happens if creditors reject the CVA?
- If less than 75% (by value) approve, the CVA fails and other insolvency options may be needed.
- Does a CVA affect company control?
- No, directors remain in control, but the process is supervised by an insolvency practitioner.
- How do I start a CVA?
- Contact an insolvency practitioner or reach out to Director First for a free assessment.
Need advice on CVAs or business rescue? Contact us today for a free, no-obligation chat.
