A company voluntary arrangement (CVA) is a formal agreement between a struggling but viable company and its creditors to repay debts, in full or in part, over an agreed period — usually three to five years. It lets a company keep trading while it works through its arrears, rather than being wound up. A licensed insolvency practitioner supervises the arrangement from start to finish.
For directors, a CVA is one of several rescue and exit routes available under UK insolvency law. It sits alongside options such as administration, liquidation and informal repayment plans with HMRC, and it's only right for companies that can show creditors a genuine, affordable route back to solvency.
What a company voluntary arrangement is and what it does
A company voluntary arrangement is a legally binding agreement, made under Part I of the Insolvency Act 1986, between a company and the creditors it owes money to. Instead of each creditor chasing the debt separately, they agree — as a group — to accept reduced or rescheduled payments over a set timeframe.
The company continues to trade under its existing directors. A licensed insolvency practitioner acts first as "nominee" (assessing and preparing the proposal) and then as "supervisor" once creditors approve it, monitoring payments and reporting to creditors until the CVA ends.
A CVA does not write off historic problems overnight. It converts a mix of pressing debts — often including HMRC arrears, supplier invoices and sometimes a landlord's claim — into a single, structured monthly contribution the company can realistically afford.
Who a CVA is suitable for
A CVA is aimed at companies that are insolvent or heading that way, but whose underlying business is still viable. That distinction matters: a CVA rescues the company, not a business that has already stopped generating income.
Typical signs a CVA may be worth exploring include:
- The company has a viable trading model and ongoing revenue, but cash flow can't currently cover legacy debt.
- Creditor pressure — including HMRC arrears or a threatened winding-up petition — is building faster than the company can repay under normal terms.
- Directors want to keep the company trading and protect jobs, rather than close it down.
- Realistic, sustainable profit forecasts exist to support future monthly contributions.
A CVA is not a fit for every situation. If the underlying business has no realistic future, or losses are structural rather than temporary, other routes — including liquidation — may serve creditors and directors better. Comparing options early matters; our guide to Company Insolvency Options: Which Route Is Right? sets out how a CVA compares with administration, liquidation and other paths.
How the proposal and creditor vote work
The process starts with the directors, working with a licensed insolvency practitioner, drafting a formal CVA proposal. This sets out the company's financial position, why it got there, and exactly what creditors will be offered — the monthly contribution, the length of the arrangement and how the company will be run.
Once the proposal is ready, the nominee reviews it and reports to the court on whether, in their professional judgement, it has a reasonable prospect of being approved and implemented. If so, it goes to creditors for a vote, usually held virtually or by correspondence rather than in person.
Creditors then have a defined window to review the proposal, raise questions and cast their vote. Shareholders also get a separate vote, though it is the creditor decision that determines whether the CVA proceeds.
The 75% approval threshold explained
For a CVA to be approved, creditors representing at least 75% by value of the debt owed (not by number of creditors) must vote in favour. There's also a safeguard: if more than 50% of the unconnected creditor value votes against, the CVA fails even if the 75% threshold is technically met once connected creditors are included.
This value-weighted system means a small number of large creditors — HMRC is often the biggest single creditor for many UK companies — can significantly influence the outcome. Once approved, the CVA becomes binding on all eligible creditors, including those who voted against it or didn't vote at all, provided they were entitled to vote and given proper notice.
What it costs and how long it lasts
CVA costs vary by case complexity, company size and the volume of creditors involved. Typically, fees cover the nominee's work in preparing and reviewing the proposal, and the supervisor's ongoing fees for administering the arrangement over its life — these are usually built into the monthly contributions rather than charged separately upfront.
Most CVAs run for three to five years, reflecting how long it realistically takes a company to repay agreed sums from trading income while continuing to meet its current, ongoing liabilities. The exact length is set out in the proposal and agreed as part of the creditor vote.
Life during a CVA: trading, control and monitoring
Directors keep running the company day to day throughout a CVA — it is not the same as administration or liquidation, where control passes to an insolvency practitioner. However, trading isn't unsupervised:
- The supervisor monitors performance against the agreed proposal and reports regularly to creditors.
- The company must keep up its agreed monthly contributions alongside normal running costs, including current tax obligations to HMRC.
- Major decisions that fall outside the terms of the proposal, such as significant new borrowing, may need supervisor or creditor consent.
- The company's CVA status is publicly recorded, which can affect how some suppliers, landlords or lenders view its creditworthiness while the arrangement runs.
Directors considering a CVA alongside informal options should understand how it differs from simply negotiating extra time with HMRC. Our comparison of Time to Pay vs CVA: Which Is Right? looks at when each route tends to fit.
Pros, cons and what happens if it fails
A CVA offers real advantages for the right company, but it isn't without downside. Weighing both sides honestly is part of deciding whether it's the right route.
Potential advantages
- The company keeps trading, and directors stay in control of day-to-day operations.
- Debt is consolidated into one affordable monthly payment, replacing multiple separate demands.
- It can halt legal action from creditors bound by the arrangement, and may prevent a winding-up petition proceeding.
- Employees generally keep their jobs, and existing contracts can often continue.
Potential drawbacks
- Not all creditors are bound — some secured creditors and certain claims fall outside a CVA's scope.
- The company's financial difficulties become a matter of public record, which some customers or suppliers may react to.
- Directors must maintain strict discipline over payments and reporting for the full term, often several years.
- If contributions are missed and the CVA fails, creditors can pursue the debts owed and the company may move into compulsory liquidation as a result.
If a CVA does fail, the supervisor typically reports the failure to creditors, who can then petition to wind up the company. Understanding the difference matters before committing to either route — see CVA vs Liquidation: What's the Difference? for a fuller comparison.
Frequently asked questions
Does a CVA affect a company's credit?
Yes, generally. Entering a CVA is recorded and can be visible to credit reference agencies and some suppliers, which may affect how the company is viewed for trade credit or lending during and shortly after the arrangement.
Can HMRC block a CVA?
HMRC votes as a creditor like any other, weighted by the value it's owed. Because HMRC arrears are often substantial, its vote can be decisive — but it cannot unilaterally block a CVA outside the normal 75%-by-value voting process.
How long does a CVA usually last?
Most arrangements run for three to five years, depending on how much the company owes and what it can realistically afford to repay from ongoing trading income.
Can directors lose their company during a CVA?
Directors normally stay in control throughout a successful CVA. Control would only typically change if the arrangement fails and the company subsequently enters administration or liquidation.
Is a CVA the same as liquidation?
No. A CVA is a rescue tool that keeps the company trading, while liquidation ends the company's existence and realises its assets for creditors. They serve very different purposes.
This article is general information, not legal, financial or insolvency advice. Every company's circumstances are different, and directors should speak to a regulated specialist about their own situation before deciding on a course of action.
If a company voluntary arrangement looks like it might be relevant to your company, Harbourfirst can introduce you to a regulated insolvency practitioner who can review your figures and explain your options — start an enquiry. Harbourfirst introduces directors to regulated specialists; it does not itself provide insolvency or legal advice.