Company Voluntary Arrangements (“CVA”)

Last Updated on 8 June 2026

What is a CVA?

A Company Voluntary Arrangement (“CVA”) enables a company or Limited Liability Partnership (“LLP”) to reach an agreement with its unsecured creditors to repay its debts over a fixed period. Consequently, a successful CVA results in a business being able to continue trading. Insolvency is avoided.

A CVA is an insolvency procedure under the Insolvency Act 1986 and is legally binding. Moreover, it is administered by a licensed Insolvency Practitioner. A company does not need to be insolvent or unable to pay its debts before a CVA proposal is made.

A CVA can involve a period of breathing space from creditor enforcement action. It can also involve the debts of certain creditors (or classes of creditor) being reduced if agreed by the creditors.

A tool for post-COVID-19 recovery

Challenges will continue for many businesses, particularly in the hospitality, retail and leisure sectors as a result of the COVID-19 pandemic. However, the full impact of COVID-19 on businesses cannot be delayed indefinitely despite the support provided by the Government.

As businesses consider their recovery options post-COVID, CVAs could be an ideal tool. In particular, they give businesses time to return to profitability before clearing their debts.

Advantages of a Company Voluntary Arrangement

The directors remain in control of the business.
The company is protected from creditor action provided the repayment schedule is maintained. Additionally, interest and charges on the debt are frozen.
There is no investigation into director conduct allowing directors to focus on turning the company around.
A CVA is flexible and its form depends on the proposal agreed by creditors.
Creditors can obtain greater returns as opposed to a liquidation process as the costs of a CVA are lower.
Overdrawn director loan accounts will not be called up. Repayments can be made over a period of time to bring them in line.

Disadvantages of a Company Voluntary Arrangement

Secured creditors are not bound by the CVA unless they agree to be bound and give up their security. This could leave companies open to Administrators being appointed, even when the CVA is adhered to.
It does not include certain creditors who have special priority in a formal insolvency. For example, this applies in relation to pension schemes.
The company’s credit rating will be affected making it harder to obtain credit from new suppliers. It could also be more difficult to renegotiate existing contracts.

Process for a Company Voluntary Arrangement

Any company/LLP considering a CVA should discuss their position with a licensed Insolvency Practitioner. An application for a CVA can be made if this is suitable and the directors or members agree.
The Insolvency Practitioner will work with the directors to prepare a CVA proposal including a payment schedule of the debt to be repaid. Moreover, the business can continue to trade as normal.
Creditors will be notified of the CVA proposal and invited to a meeting to vote on it. It should be noted that creditors are still able to challenge a CVA in the event of a material irregularity or unfair prejudice.
The CVA is approved if 75% of creditors (by debt value), who vote, agree to it. The CVA binds all creditors, even if they voted against it, subject to any challenge made by them. If the 75% threshold is not met, the company could face insolvency.
The CVA is registered at Companies House but it is not publicly advertised.
The creditor payments are made through the Insolvency Practitioner until the debts are paid off. If the agreed payment schedule is not met, any of the creditors can apply to wind up the business.

Typically, the length of a CVA is between 3-5 years.

Is a Company Voluntary Arrangement right for you?

Business rescue is possible if the business is viable in the long-term. Nevertheless, it is essential to seek quick advice to understand your options.

If you would like to discuss this further, please contact the team at Henderson Loggie.