What is a Company Voluntary Arrangement?

A Company Voluntary Arrangement (CVA) is a formal insolvency process that allows a financially distressed company to restructure its debts while continuing to trade. This legally binding agreement is made between the company and its creditors, enabling the business to repay a portion of its debts over an agreed period, usually between three and five years. A CVA can be a viable alternative to liquidation, offering a pathway to recovery without ceasing operations.

How a CVA Works

A CVA is designed to provide breathing space for businesses facing temporary financial difficulties. It is typically used when a company has a viable future but requires time to stabilise its financial position. The process follows these key steps:

Assessment and Proposal

A Licensed Insolvency Practitioner (IP) will assess the company’s financial situation and work with the directors to draft a formal proposal outlining how the debts will be repaid. This proposal must be fair and feasible for creditors while allowing the company to continue operating.

Creditor Approval

The proposal is presented to creditors, who will vote on whether to accept it. At least 75% (by value of debt) of voting creditors must approve the CVA for it to be implemented.

Implementation

Once approved, the CVA becomes legally binding on all unsecured creditors. The company will make agreed payments into the CVA, which will then be distributed among creditors by the Insolvency Practitioner.

Completion

Upon successful completion of the CVA, any remaining unsecured debts included in the arrangement may be written off, allowing the company to move forward on a stable footing.

The Role of Directors in a CVA

Company directors play a crucial role in the CVA process. Their responsibilities include:

  • Working closely with the Insolvency Practitioner to develop a realistic repayment plan.
  • Continuing to manage the day-to-day operations of the business.
  • Ensuring compliance with the agreed CVA terms to avoid failure of the arrangement.
  • Communicating openly with employees, stakeholders, and creditors to maintain trust and support during the process.

Advantages of a CVA

  • Allows continued trading – Unlike liquidation, a CVA enables the company to keep operating while restructuring its debts.
  • Reduces creditor pressure – Once the CVA is in place, creditors must adhere to the agreement, preventing legal action such as winding-up petitions.
  • Improves cash flow – Debt repayments are structured into manageable instalments, easing financial strain on the business.
  • Avoids director disqualification – Directors retain control of the company rather than facing compulsory liquidation consequences.
  • Preserves jobs – Employees benefit from the continuation of the business, reducing the risk of redundancies.

Is a CVA Right for Your Business?

A CVA is most suitable for businesses that:

  • Are fundamentally viable but struggling with temporary financial difficulties.
  • Have a sustainable level of income to meet the repayment commitments.
  • Need to protect themselves from creditor action while they restructure.

If your company is facing financial distress but has a chance of recovery, a CVA could provide the solution you need.

Contact Us Today

Navigating financial difficulties can be challenging, but you don’t have to face them alone. At DCA Business Recovery, we specialise in helping businesses explore all available insolvency solutions, including CVAs. Contact us today for a free, confidential consultation to discuss your company’s options and take the first step toward financial stability.

Further Guidance

For additional support, explore our FAQs for quick answers to common questions about Company Voluntary Arrangements. You can also download our PDF guides for clear, practical guidance on each stage of the CVA process. These resources are designed to help you make informed decisions and navigate your company’s restructuring with confidence.

Guides

Download PDF guides with clear, practical advice on managing a Company Voluntary Arrangement, including compliance requirements and the key steps involved in restructuring your business effectively.

Frequently Asked Questions

Due to the amount of work required to prepare a proposal to be sent to creditors we advise that a period of 4-6 weeks from initial meeting to providing the final proposal to creditors.

We will prepare the proposal based on information provided by directors and their accountants. A cashflow forecast will be required to enable us to consider affordable monthly payments into the arrangement.

No. A CVA will normally require the company to remain trading and therefore the assets will be needed to ensure trade continues and contributions can be made.

In order for the CVA to be accepted it will require 75% (in debt value) of your creditors voting on the proposal to agree the terms.

Also 50% or more of the shareholders will need to agree the proposals.

If the proposal is accepted by 75% (in debt value) of creditors voting on the proposal, then the arrangement is accepted and as such all creditors are bound by its terms.

Creditors can put forward modifications to the proposal when voting, but the directors will need to agree to any modifications. This will also be dependent on the value of the vote the creditor has.

My accountant referred me to DCA when I was presented with a large PAYE demand from HMRC.

I tried to arrange a payment plan with them and I was unable to do so.

Luke had a meeting with me and my partner and discussed the options available and before we put the company into liquidation.

Anonymous
Everything was dealt with promptly, very happy with the service and always able to contact Luke and Keely.
IVA Client
DCA are absolutely fantastic and professional and I felt I was able to contact them at anytime.
IVA Client
I know Debbie and Luke Cockerton very well. They are my favourite insolvency people mainly because they actually help my clients rather than just bayonetting the wounded and stealing their gold teeth as some insolvency people seem to do.
Accountant Contact
I benefitted directly and notably by the experience and professional knowledge applied without hesitation to my problems by the staff of DCA within a most friendly operation. The situation was dealt with efficiently, courteously and sympathetically to my personal position.
IVA Client