Company Voluntary Arrangement (CVA)
A formal repayment proposal may allow a viable company to address historic debts while continuing to trade.
What is a CVA?
A Company Voluntary Arrangement is a formal agreement between a company and its creditors about how debts will be dealt with. It is arranged through an insolvency practitioner and requires creditor approval. A proposal must be supported by credible financial information.
Further reading: GOV.UK guidance on Company Voluntary Arrangements.
It may be worth exploring where the underlying business can generate enough cash to meet current costs and fund the proposed contributions. It is not simply a way to reduce debts without changing the trading position that caused them.
Assess affordability before proposing terms
Review revenue, gross margins, staff costs, rent, tax and finance payments. Forecasts should account for seasonal trading and the possibility of delayed receipts. If the proposed monthly contribution leaves no working-capital buffer, the plan may struggle even if creditors approve it.
The practitioner considers the proposal and explains the approval process, fees, reporting and creditor treatment. Directors need to understand which liabilities are covered, how new debts will be paid and whether any security or guarantees are affected.
Compare a CVA with other options
An informal settlement or an HMRC payment plan may suit a more limited problem. Administration or liquidation may require assessment if the business is not viable or cannot support a proposal. If an approved CVA fails, further insolvency action may follow, so affordability matters from the outset.
Start with the facts
Bring a current picture of debts, assets, cash flow and any creditor deadlines.
- Latest accounts and bank balances
- HMRC and supplier arrears
- Court papers or enforcement notices
- A short cash-flow forecast
Questions about your options
A CVA has statutory approval rules. The appointed insolvency practitioner explains the voting requirements and which creditors are bound.
No. Approval, compliance with the proposal and the business’s future performance all matter.
Directors normally remain in control while the company trades under an approved CVA. The proposal is supervised by an insolvency practitioner, and the company must keep to its obligations.
A proposal needs to account for ongoing trading costs and new liabilities as well as historic debts. HMRC considers whether future tax can be paid on time when deciding whether to support a CVA.
Let’s talk about your next step
Tell us what is happening. We will help you understand the information needed to assess your options.