How to Enter a Company Voluntary Arrangement (CVA)

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What is a Company Voluntary Arrangement?

Company Voluntary Arrangement (CVA) is a formal contract between an insolvent company and its creditors. They allow companies to continue trading while repaying creditors, usually over a period of 3 to 5 years.

Benefits of a CVA

Entering a CVA gives a company director an opportunity to approach creditors and say:

We have a good business moving forward. But we've collected some historic debt that we can't service. A proposal is being put together for us to enter an arrangement that allows the company to continue trading while repaying a percentage of what we owe you over the next 5 years.”

How is a CVA proposal approved?

A group of creditors who are owed at least 75% of the debt must vote in favour of the proposal for a Company Voluntary Arrangement to be approved. They can do this via email, virtual meetings or some other correspondence.

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How to Enter a CVA

The process begins when a company director seeks out and hires a nominee (insolvency practitioner / IP) to put together a Company Voluntary Arrangement proposal. The proposal takes 2 to 4 weeks to prepare and normally includes:

  • Financial data
  • A synopsis of the company’s trading history
  • Information about the directors, creditors, shareholders and employees
  • 3 to 5 year restructuring projections explaining how the business will become profitable and pay monthly into the CVA.

A Company Voluntary Arrangement is deemed to have failed if the company falls into more than 2 months' arrears on its contributions to creditors. Consequently, the nominee / IP (who becomes a 'supervisor' after the proposal has been accepted) will be obliged to wind the company up.


Connected Creditors

After connected creditors (the director's friends and relatives who lent money to the company) are removed from the equation, 50% of the remaining creditors must be in favour for the proposal to be successful.


Tips for Company Directors

It's a sad truth, but some company directors approach insolvency procedures as mechanisms to grow their business. As a result, entering CVAs has become popular, especially as they're less expensive than alternatives such as a Pre-pack Administration. Moreover, the insolvency practitioner in a Pre-pack must investigate the director’s conduct.

In contrast, a director applying for a Company Voluntary Arrangement faces little scrutiny because sufficient debt has been written-off to make the company solvent. Additionally, creditors have ratified the proposal, and agreed to continue trading. Directors will naturally seek out a nominee / insolvency practitioner they feel comfortable with, even though IPs:

  • Are prohibited from giving them independent advice
  • Have a legal duty to act in creditors' best interests.

Subsequently, a director contemplating a CVA should carefully consider the terms of the agreement. It's important to ensure they are beneficial and appropriate for the situation. Contact I&L today for free and confidential advice.


I&L can provide guidance and counsel as to what's in your best interests, and recommend a commercially-minded insolvency practitioner to facilitate a Company Voluntary Arrangement. Call 020 7504 1300 now for free and confidential advice…

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