What is a company voluntary arrangement (CVA)?

What a CVA is

A company voluntary arrangement is a statutory process under the Insolvency Act 1986. It lets a company that cannot pay its debts reach a binding agreement with creditors to repay a proportion of what is owed — typically over three to five years — rather than going into administration or being wound up. The company continues to trade, and the directors stay in place to run it.

A licensed insolvency practitioner (IP) acts as supervisor, monitors compliance and distributes payments to creditors. Once 75% of creditors by value vote in favour, the arrangement binds all unsecured creditors — including those who voted against it.

How the process works

The directors typically work with an IP to draft a proposal setting out what creditors will receive and over what term. The proposal must include a statement of affairs showing the company's assets, liabilities and overall position. Creditors then vote, usually at a virtual or in-person meeting. If 75% by value approve, the CVA takes effect and the payment schedule begins.

Throughout the CVA, the company files regular reports with the supervisor. If it misses payments, a creditor or the supervisor can apply to court to have it wound up.

What creditors can and cannot do

Once a CVA is in place, unsecured creditors bound by it cannot take individual enforcement action — they cannot issue county court judgments, petition for winding-up or pursue the company separately. Secured creditors (those with a fixed charge or floating charge over assets) are generally not bound and can still enforce their security unless they choose to participate. HMRC is an ordinary unsecured creditor and can be included, though it takes a harder line in practice.

What a CVA means for future borrowing

A CVA is a significant mark on a company's credit report and will appear in searches by prospective lenders. Most mainstream banks will not lend to a company in a CVA, and the restriction continues for some time after completion. Alternative lenders that assess trading performance and cash flow directly — rather than relying solely on credit score — may still consider an application, though terms will reflect the elevated risk profile.

Improving creditworthiness after a CVA takes time: consistent on-time payments during and after the arrangement, rebuilding supplier relationships and maintaining clean bank statements all contribute. See improving business creditworthiness for a practical path.

CVA vs administration vs liquidation

A CVA keeps the company trading under director control; it suits a fundamentally viable business with a temporary over-indebtedness problem. Administration hands control to an IP and can lead to a sale of the business or a restructuring; it offers more protection from creditor action but is more drastic and costly. Liquidation winds the company up entirely and distributes assets to creditors; it ends the business.

The right route depends on whether the business is commercially viable — generating or capable of generating enough cash to fund a repayment plan. An IP can advise on which process fits.

Is a CVA right for your company?

A CVA is worth exploring if the company has a viable core business that is being dragged down by historic debt — for example, a lease entered before a market shift, or creditor arrears that built up during a cash-flow crisis. It is not a solution for a business that is fundamentally unprofitable, because the repayment plan requires surplus cash that the trading operation must generate.

Directors considering a CVA should take independent legal and insolvency advice. The content here is educational, not advice on any specific situation. For cash-flow issues in an otherwise trading business, see how to manage a cash flow crisis and borrowing with adverse credit.