Company Voluntary Arrangement (CVA) — full guide

CVA is the right procedure when:

• ›The business is fundamentally viable — it can generate sufficient operating cashflow to support ongoing trading.
• ›The debt burden is unmanageable — particularly historic debt the business cannot service alongside current operations.
• ›Directors and shareholders are prepared to continue running the business through the restructuring period (typically 3–5 years).
• ›There is realistic prospect of unsecured creditor agreement — they receive a better outcome than liquidation would deliver.

CVA is not the right procedure when: the business is structurally unviable; trading losses are accelerating; there is no realistic prospect of generating contributions to creditors; or directors are not willing to commit to a multi-year recovery plan.

• ›Section 1 IA 1986 — the statutory basis for the CVA proposal.
• ›Section 2 IA 1986 — the IP’s role in preparing the proposal (the nominee).
• ›Section 5 IA 1986 — the creditors’ decision procedure approving or rejecting the proposal.
• ›Insolvency (England and Wales) Rules 2016 Part 2 — detailed procedural rules.

The directors appoint a Licensed Insolvency Practitioner as ‘nominee’ — the IP who will prepare the CVA proposal and put it to creditors. The nominee reviews the company’s position, identifies the viable restructuring approach, and works with the directors on the proposal. Typical nominee fee: £5,000–£15,000 for SME CVAs. Larger and more complex cases substantially higher.

The CVA proposal is the central document. Required by section 1 IA 1986 to set out:

• ›Background and reasons for the CVA — why the company is in difficulty.
• ›Proposed terms — amount of monthly / quarterly / annual contributions; duration (typically 3–5 years); how contributions are distributed.
• ›Statement of company affairs — assets, liabilities, creditors.
• ›Estimated outcome comparison — what creditors receive under CVA vs liquidation.
• ›Trading plan — operational changes, cost reductions, revenue projections.
• ›Director and management commitments — what leadership will do during the arrangement.
• ›Variation clauses — what happens if circumstances change.
• ›Failure provisions — what happens if the company breaches the CVA terms.

Proposal preparation typically takes 2–4 weeks once the nominee is appointed. The proposal is substantive — typically 30–60 pages for SME CVAs.

Creditors vote on the proposal. Section 5 IA 1986 requires:

• ›75% by value of creditors voting must approve — the principal threshold.
• ›Of those voting, at least 50% by value of unconnected creditors must approve.
• ›Members must also approve by simple majority.

The decision procedure is typically by deemed consent or virtual meeting under SIP 6 (similar to CVL procedure). The 14-day notice period applies. If approved, the CVA binds all unsecured creditors who had notice of the proposal — whether they voted in favour, against, or did not vote.

If rejected, the CVA does not proceed. The company’s position is unchanged — directors must consider alternative procedures (administration, CVL, or non-insolvency options).

Once approved, the nominee becomes the ‘supervisor’ of the CVA. The supervisor’s role:

• ›Receive the agreed contributions from the company.
• ›Distribute contributions to creditors per the proposal terms.
• ›Report to creditors annually on progress.
• ›Monitor company compliance with the proposal.
• ›Apply for variation or termination if circumstances change.

During the CVA, the company continues to trade. Directors retain their powers (no displacement as in administration or CVL). Day-to-day management is unchanged. The principal constraint is the obligation to make contributions to the supervisor on schedule.

• ›Successful completion — the company makes all contributions over the agreed period; final distribution; CVA terminates. The company emerges with the residual compromised debt extinguished.
• ›Failure — the company fails to make agreed contributions. The supervisor issues a notice of breach. If unremedied, the CVA terminates and the supervisor typically petitions for the company’s compulsory liquidation.

Approximately 65–75% of CVAs complete successfully. The remainder fail — typically because trading deteriorated and the company couldn’t meet contributions. Failure rates depend heavily on the realism of the original proposal.

• ›Duration: 3–5 years.
• ›Monthly contributions: £5,000–£25,000.
• ›Total contributions: £200,000–£1,500,000.
• ›Unsecured creditor outcome: 20–50% of the original debt.
• ›Secured and preferential creditors typically continue under their existing arrangements (CVA doesn’t compromise them).
• ›HMRC: typically paid in full from contributions (secondary preferential for VAT / PAYE / NICs / CIS / student loan post-1 December 2020).

• ›Nominee fee — £5,000–£15,000 for SME CVAs (paid before approval; from company funds).
• ›Supervisor fee — typically 5–15% of contributions, paid in arrears as contributions are received.
• ›Disbursements — statutory advertising, legal fees, professional valuations where required.

Total CVA fees typically range £15,000–£50,000+ depending on size and complexity.

CVA is preferred over administration where the business is viable and directors want to continue running it — administration involves displacement of directors. CVA is preferred over CVL where business has a viable future — CVL terminates the business; CVA preserves it. CVA is not preferred where the business is structurally unviable; where creditor opposition means the 75% threshold won’t be met; or where director commitment to multi-year recovery is uncertain.

For the comparison with administration, see Administration vs CVL. For director duties during a CVA, see Director duties in financial difficulty. For the CVL alternative, see CVL pillar.