Company Voluntary Arrangements (CVA)
A Company Voluntary Arrangement is a binding deal between your company and its creditors to repay a proportion of the debt over 3 to 5 years while you keep trading.
It is the only formal insolvency process that lets you retain control of the company, continue operating, and restructure the debt without closing the business.
We work with directors considering CVAs every week. The ones that succeed share three things: a viable underlying business, a realistic repayment proposal, and creditors who believe the deal gives them more than liquidation would.
The ones that fail usually fail because the business was not strong enough to sustain the repayments, or because the proposal was too optimistic and the company fell behind within 12 months.
We are honest about both outcomes because a failed CVA is worse than no CVA at all: it wastes time, money, and creditor goodwill, and it ends in liquidation with higher total debts than where you started.
Quick Answer: What Is a CVA and Who Is It For?
A CVA is a formal agreement under Part I of the Insolvency Act 1986. A licensed insolvency practitioner (the “nominee”) helps you draft a proposal. Creditors vote on it. If 75% by value approve, the arrangement is binding on all creditors, including those who voted against it.
There is an important limit. A CVA binds unsecured creditors, but it cannot touch a secured creditor (a bank with a charge over company assets, say) or a preferential creditor without their express consent. They keep their rights over any collateral unless they agree otherwise. Section 4 of the Insolvency Act 1986 sets this out.
You continue trading, make monthly payments to the supervisor (the IP who monitors compliance), and the supervisor distributes the funds to creditors over the term.
In our experience, a CVA is right for you if the business generates enough cash to fund monthly repayments and cover current obligations, the debt problem is specific (not structural), and creditors are likely to agree because the CVA offers better returns than liquidation.
It is not right if the business model is broken, if you cannot sustain the repayments, or if a single large creditor holding more than 25% of the debt will block the vote.
How a Company Voluntary Arrangement Works: Step by Step
Step 1: Initial assessment. You consult a licensed IP who assesses whether a CVA is viable. They review the company’s financial position, trading prospects, creditor landscape, and your ability to fund the proposed repayments. We advise being completely honest at this stage. If the numbers do not work, the IP will tell you, and it is better to hear it now than after the CVA fails.
Step 2: Drafting the proposal. The IP (acting as nominee) drafts the CVA proposal. This document sets out how much creditors will be repaid (as pence in the pound or a fixed monthly amount), over what period, under what terms, and what happens if the company defaults. We find the proposal typically takes 2 to 4 weeks to prepare.
Step 3: Nominee’s report. The nominee files a report with the court confirming that the proposal has a reasonable prospect of being approved and implemented. This is a professional opinion, not a guarantee.
Step 4: Creditor vote. Creditors vote on the proposal through a decision procedure (meeting, correspondence, or deemed consent). The proposal is approved if 75% by value of creditors who vote are in favour. A secondary threshold prevents connected creditors (you, family members) from swinging the vote: the proposal must also be approved by a majority excluding connected parties.
Step 5: Implementation. Once approved, the CVA is binding on all creditors who had notice of the decision procedure. You make monthly payments to the supervisor. The supervisor distributes funds to creditors according to the proposal terms. You continue trading normally, subject to the terms of the CVA.
Step 6: Completion or failure. If you complete all payments, the CVA ends and the remaining debt is written off. If you default (typically by missing two or more consecutive payments), the supervisor terminates the CVA, creditors are released from the terms, and the company usually enters liquidation.
Company Voluntary Arrangement Costs: What to Expect
The nominee’s fee for preparing and presenting the CVA proposal is typically £5,000 to £8,000. The supervisor’s ongoing fee for monitoring the arrangement over its term is usually a percentage of the distributions (10 to 15%) or a fixed annual charge. Legal fees may apply if the proposal is complex or if creditors challenge it.
We tell directors: the nominee fee is the cost of entry. The real cost is the monthly repayments to creditors over 3 to 5 years.
A CVA that proposes to repay 30p in the pound on £200,000 of debt over 5 years requires monthly payments of approximately £1,000 plus the supervisor’s fee. Can the business sustain that on top of all current obligations? If the answer is borderline, the CVA will probably fail.
Company Voluntary Arrangement Advantages and Disadvantages
Advantages of a CVA:
- You keep control of the company. No administrator, no liquidator.
- The business continues trading. Customers, contracts, and staff are preserved.
- Creditors are bound by the terms. They cannot enforce during the CVA.
- Cheaper and less invasive than administration.
- Demonstrates to the Insolvency Service that you took responsible action.
Disadvantages of a CVA:
- No automatic moratorium. Creditors can still enforce while the proposal is being prepared (unless you also file for a standalone moratorium under Part A1).
- 75% threshold. A single large creditor holding more than 25% can block the entire CVA.
- HMRC can reject it. If HMRC votes against and holds enough debt to block, the CVA fails.
- Current obligations must be met. You must pay new taxes, new invoices, and current rent on time during the CVA. Falling behind on current obligations terminates the arrangement.
- Failed CVAs are worse than no CVA. The company enters liquidation with higher debts (the CVA fees plus months of continued trading) and less creditor goodwill.
Will HMRC Approve Your CVA?
HMRC is often the largest creditor and their vote determines whether the CVA succeeds. We find HMRC is more willing to approve CVAs where the proposal offers genuinely better returns than liquidation, the company is current on all tax obligations, the director has a credible track record, and the repayment period is reasonable (HMRC prefers shorter terms).
HMRC rejects CVAs where the company has a history of broken TTP arrangements, the proposal is unrealistic, the company continues to accumulate tax debt while proposing to restructure the old debt, or the CVA appears to be a delay tactic rather than a genuine rescue.
We advise directors to engage with HMRC informally before the formal CVA vote. The nominee can contact HMRC’s Voluntary Arrangement Service (VAS), the unit that reviews every CVA proposal, to gauge their position and adjust the proposal terms before the vote. A rejected CVA wastes everyone’s time and money. Pre-engagement reduces that risk significantly.
CVA vs Other Insolvency Options
- CVA vs Administration. A CVA preserves director control and is cheaper. Administration provides an automatic moratorium and is necessary when creditor pressure is too intense for a CVA timeline.
- CVA vs CVL. A CVA rescues the company. A CVL closes it. If the business is viable, CVA. If not, CVL.
- CVA vs TTP. A TTP only covers HMRC debts. A CVA covers all creditors. If HMRC is your only problem, TTP is simpler and cheaper.
- CVA vs informal negotiation. Informal arrangements are not binding. A CVA is. If creditors keep breaking informal agreements, a CVA provides enforceability.
CVA: What to Do Next
If you believe your business is viable but cannot sustain its current debt load, a CVA may be the right route. The first step is a consultation with a licensed insolvency practitioner who can assess whether the numbers work: can the business fund the proposed repayments and meet current obligations?
If yes, the CVA has a realistic chance. If no, you need a different route.
Company Debt connects directors with licensed IPs who specialise in CVAs. A free, confidential consultation will assess viability and give you a realistic view of whether creditors are likely to approve.
FAQs on Company Voluntary Arrangements
How much does a CVA cost?
The nominee’s fee is typically £5,000 to £8,000 to prepare and present the proposal. The supervisor charges an ongoing fee (10 to 15% of distributions or a fixed annual charge) for monitoring the arrangement. The total cost over a 5-year CVA depends on the amount being repaid and the supervisor’s fee structure.
Can HMRC block a CVA?
If HMRC holds more than 25% of the total debt by value, they can block the CVA by voting against it. Even if they hold less, their vote carries significant weight. Pre-engagement with HMRC’s CVA team before the vote is essential to assess their position and adjust the proposal if needed.
What happens if a CVA fails?
The supervisor terminates the arrangement. Creditors are released from the CVA terms and can enforce their original claims in full. The company usually enters liquidation at that point. The total debt is typically higher than before the CVA because the nominee fees and months of continued trading have added to the balance.
Because the company then moves into liquidation, the liquidator investigates director conduct. Any company money or property that was misapplied along the way can be pursued as misfeasance under section 212 of the Insolvency Act 1986, so keep clean records of how funds were used throughout the arrangement.
Do I keep control of my company during a CVA?
Yes. Unlike administration, a CVA does not transfer control to an IP. You continue to run the company, make commercial decisions, and manage day-to-day operations. The supervisor monitors compliance with the CVA terms (monthly payments, current obligations) but does not manage the business.
How long does a CVA last?
Typically 3 to 5 years. The term is set in the proposal and approved by creditors. Shorter terms are more attractive to creditors but require higher monthly payments. Longer terms reduce monthly payments but extend the period during which you must maintain compliance.
What is the success rate of a CVA?
Insolvency Service data suggests roughly a third of CVAs run their full term to completion, with the remainder failing or converting to liquidation. The success rate is significantly higher where the proposal is conservative, the underlying business is genuinely viable, and HMRC engaged early. Failure modes cluster around over-optimistic repayment levels and falling behind on current tax.
What happens to an overdrawn director’s loan account in a CVA?
An overdrawn director’s loan account is money you owe the company, and the proposal must disclose it to creditors as an asset. They will expect it repaid into the CVA over its term. A proposal that leaves directors better off than the creditors taking a cut rarely gets approved, so treat the loan account as part of what you put on the table, not something the CVA writes off.
