Email David Kirk direct by clicking on his name.

Company Voluntary Arrangements

Company Voluntary Arrangements

There is a lot written about company voluntary arrangements (CVA’s) on the internet. They sound like a really good idea. You do not need to close and liquidate. You can keep going, keep your bank account and trading name and your creditors can also get something back and not see it all go down the drain in a liquidation and closure.

Sometimes if your company has qualifications and licences you can keep these as well. There is also no need for a report to the Insolvency Service on the directors’ conduct – an issue if the directors have had recent previous insolvencies.

So, why doesn’t everyone do a CVA and keep going when they hit trouble?

The problems with CVA’s

There are several hurdles to get through to make a CVA work. Some of the issues are:

  1. You need 75% of creditors by value who vote on the CVA to approve them.
  2. Creditors can say yes but with difficult or unrealistic modifications e.g. they want the amount they get back to be a lot more.
  3. One creditor over 25% by value can block the CVA or put through some tough modifications. Often this creditor is HM Revenue and Customs. They will make modifications to stop dividends to working directors pushing up the PAYE cost or insist on more careful monitoring by the insolvency practitioner who acts as the CVA supervisor.
  4. It can take a few weeks to get the CVA document drafted and agreed and then circulated to creditors. In the meantime, there is no moratorium or protection from creditors to stop them from taking action.
  5. It will ruin the credit rating of the company and be recorded at Companies House for a long time.
  6. A CVA is usually based on payments by instalments and if you miss 2 or 3 payments the CVA usually fails which means liquidation anyway.
  7. If the company has had a fundamental problem and that has not been solved e.g. an expensive property lease, then without that being resolved it will still make losses.
  8. It can trigger the date for employee claims from the government redundancy fund (when the employees are not owed any money) but block the employees claiming in a subsequent liquidation because of the first CVA event.

Often, once the issues above are explained to directors they would rather liquidate and close and buy back the assets or use a pre-pack administration. It gives them more control over the situation.

When does a CVA start to be a sensible choice

I know I have written the negatives of CVA’s, but they do have their good points.
They allow a company to:


It can keep its trading name


It can keep assets in its name that it needs to trade


The company can maintain qualifications that they may need to trade


Preserve some credibility with suppliers and be seen to be doing the right thing


Minimise disruption to customers


Keep its bank account


Keep the debtors, stock, and assets due to it

One good use of a CVA is to restructure a chain of retail shops. Normally all suppliers as essential suppliers continue to be paid apart from landlords. Landlords are then categorised into the type of lease they have and whether to keep a lease on the same terms, push through a rent reduction or break the lease because the retail site is no longer viable.

CVA's step by step process

Meet with the directors and consider all the options. It has to be worth considering the alternatives such as Administration to at last rule them out.


If the CVA is the right solution start to prepare the CVA proposal. This can be a lengthy document setting out the business history, its current financial position and the offer to creditors. Often it also includes a cash flow showing an ability for the company to make monthly payments.


The Insolvency Practitioner then writes a report called a Nominees Report giving an opinion on the merits of the CVA proposal to creditors and whether it is fair to all parties.


The final signed documents are then sent to all shareholders (to have a shareholder meeting to approve the CVA or not) ant to all creditors to approve the CVA or not.


These meetings can be adjourned for up to 14 days.


If the CVA is approved a report will be filed with all creditors and shareholders as well as at Companies House.


A CVA is not usually as quick as liquidation or administration and as there is no protection from creditors in that period and this is often a reason why CVA will not work. Typically, even a quick CVA can take 4 to 6 weeks to be put together and agreed upon.

Who We Are




Sign up to our newsletter

Request a callback

Simply fill out the short form below and I will get back to you.

David Kirk Portrait

David Kirk

Licensed Insolvency Practitioner