Not every struggling business needs to close its doors. Sometimes the fundamentals are sound—the product, the people, the purpose – but something’s gone wrong financially. Perhaps a major customer defaulted, Covid caused lasting disruption, or debt repayments have simply outpaced income. If that’s the case, a Company Voluntary Arrangement (CVA) might just be the rescue tool you need.
In this week’s blog, I’ll walk you through what a CVA is, when it’s appropriate, how the process works, and what practical steps directors can take to get one moving. As always, I’ll offer some tips and a handy checklist at the end.
What Is a CVA?
A CVA is a formal insolvency procedure that allows a company to reach a legally binding agreement with its creditors to repay some or all of its debts over time – typically 3 to 5 years.
It’s designed for companies that are technically insolvent but commercially viable – meaning the underlying business could succeed if given some breathing room.
Importantly, the directors remain in control throughout (unlike administration), but an insolvency practitioner (like me) oversees the CVA and monitors compliance.
When Is a CVA Suitable?
A CVA is worth considering if:
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Your company is cash-strapped but still trading
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Creditors are pressuring you, but would prefer payment over time to liquidation
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You’ve faced a one-off shock (like a pandemic, market loss, or key customer default)
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You have a core profitable business that could return to health with restructuring
CVA Pros and Cons
Advantages
✅ Avoids liquidation and keeps the company alive
✅ Directors retain control (with oversight)
✅ Reduces creditor pressure with one unified plan
✅ Can terminate expensive leases or contracts
✅ Improves cashflow predictability
Disadvantages
❌ Stigma of formal insolvency
❌ Requires at least 75% of creditors (by value of those voting) to vote in favour
❌ Normally requires upfront IP costs to propose
❌ May affect credit rating and future supplier terms
How the CVA Process Works
Step 1: Seek Early Advice
Talk to a licensed insolvency practitioner as early as possible. We’ll review your trading position and advise if a CVA is viable.
Step 2: Drafting the Proposal
You’ll work with the IP to prepare a detailed CVA proposal for creditors. This includes:
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A business plan showing future viability
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Proposed repayment terms (monthly contributions or asset realisations)
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A breakdown of current debts and contracts to retain or end
Step 3: Filing and Circulation
The proposal is filed with the court and circulated to creditors. A meeting date is set, typically 14–28 days later.
Step 4: The Vote
At the creditors’ meeting, at least 75% (by value) must approve the CVA. If that happens, it becomes legally binding on all unsecured creditors, even those who voted against it.
Step 5: Supervision and Compliance
If approved, the IP becomes Supervisor of the arrangement and ensures contributions are made, creditors are paid, and terms are followed.
What Can a CVA Include?
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Debt write-offs (partial forgiveness of historic debts)
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Monthly contributions from future profits
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Asset sales to generate one-off payments
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Lease exits or changes to onerous contracts
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Retention of key suppliers or staff
Every CVA is bespoke—it’s not a one-size-fits-all solution.
Practical CVA Tips
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Honesty wins support: Creditors respond better to realistic plans than hopeful promises.
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Plan lean, not loose: Build a CVA you can consistently afford – underpromise and overdeliver.
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Communicate with your creditors early and often. A creditor who understands your situation is more likely to vote yes.
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Don’t over-rely on trade credit during the CVA. Build resilience, not dependency.
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Keep the IP in the loop – we’re here to help make the plan work long-term, not to trip you up.
Takeaway Checklist
✅ Is your company technically insolvent but operationally viable?
✅ Can you make consistent contributions over 3–5 years?
✅ Are creditors likely to agree to a structured repayment plan?
✅ Have you reviewed lease obligations or legacy contracts that could be ended in a CVA?
✅ Have you discussed options with a licensed insolvency practitioner?
✅ Have you prepared updated cashflow forecasts and a business plan?
Where to Learn More
Paul Brindley FCA
Licensed Insolvency Practitioner
Midlands Business Recovery