Company Voluntary Arrangement

What is a CVA?

When a company is experiencing financial difficulties, a Company Voluntary Arrangement or CVA can be a very helpful mechanism towards ensuring its survival while, at the same time, guaranteeing fair treatment for its creditors.

A Company Voluntary Arrangement or CVA can be an attractive alternative to administrative receivership, administration or liquidation. The key benefits are:

  • A Company Voluntary Arrangement or CVA is the only option which ensures that the directors of the company remain in control of their business and the shareholders retain ownership of its assets. In each of the alternative procedures the effective control and ownership of the business and assets reside with the Licensed Insolvency Practitioner.
  • The detailed commercial terms can be very flexible. The scheme can simply provide for payments out of future cash flows, or perhaps the sale of assets or less usually to exchange debt for new shares
  • In some cases it is important to get a legal freeze on creditors claims which can be obtained through the Moratorium option.

It works like this. With the help of the Licensed Insolvency Practitioner, the directors come to an arrangement with the creditors about the scale and the timing of the repayment of debts. There are no set rules for this. The agreement is entirely between the company and its creditors. Not all creditors have to agree: a majority of 75% by value is sufficient. The creditors can suggest changes to the proposal which the directors have to agree if the scheme is to be taken forward.

When the proposal has been agreed, it is filed with the Court and with Companies House. It is legally binding on all parties to it. A Supervisor is appointed to ensure that the company adheres to the arrangement. The key factor is that it enables the business to continue to trade, so increasing the chance of a turnaround. The proprietors of the company can retain their positions and roles and may safeguard their home if personal guarantees had been given to creditors.

The terms of the proposals to creditors may vary however they will expect their prospects of recovering money will be at least as good as in any other form of insolvency procedure. The proposal will need to make certain formal disclosures including provisions to cater with failure of the scheme.

Only the creditors are advised of the Company Voluntary Arrangement, so the kind of publicity that can damage the company’s prospects can be minimised.


Often it is not necessary to obtain a formal moratorium against actions by creditors.  However, where assets need to be protected or if creditors have started recovery or legal action, application can be made for a Moratorium which freezes all claims until the creditors meeting is held.  The Nominee to the scheme has additional controlling and reporting obligations relating to this period.  Use of this tool will increase the costs of setting up a scheme.  Click here for more details on Moratorium Guidelines

Moratoria are only available to “small companies”.  To be a small company you need to satisfy 2 or the 3 test set out:- ie

  • Turnover of less than £6.5m
  • Less than 50 employee
  • Balance sheet totals of less than £3.26m


Example of a Proposal to Creditors for a Company Voluntary Arrangement

Apply to Bankrupt someone who owes you money

Case Study of a Company Voluntary Arrangement