Company Voluntary Arrangement (CVA), explained
A CVA is a deal between a company and its unsecured creditors: less repayment, more time, no formal insolvency filing over the trading business. Directors keep control. Creditors get a Supervisor watching the money. Here's exactly how it works.
of creditors by value voting must approve
of unconnected creditors voting must approve
including those who voted against
How a CVA is proposed and approved
- Step 1 — Instruct a Nominee
Directors instruct a licensed insolvency practitioner to draft the CVA proposal, review cashflow forecasts and stress-test the offer to creditors.
- Step 2 — Draft the proposal
Full financial disclosure: statement of affairs, cash forecast, comparator (what creditors would get in liquidation), payment schedule, terms of the compromise, list of excluded claims (secured, preferential).
- Step 3 — File with court and creditors
The Nominee reports whether the proposal is fair and has a reasonable prospect of being approved. Notice goes to every known creditor with at least 14 days to consider.
- Step 4 — Creditor decision procedure
Usually a virtual meeting or a deemed-consent process. 75% by value of creditors voting must approve; at least 50% of unconnected creditors voting must also approve.
- Step 5 — Supervision begins
The Nominee becomes Supervisor. The company pays into the CVA account on schedule; the Supervisor distributes dividends and files annual progress reports.
- Step 6 — Completion or failure
On full payment the Supervisor certifies completion and creditors are legally barred from further claim. On material default the Supervisor issues a Notice of Failure.
Who is affected — and who isn't
Unsecured creditors: trade suppliers, unsecured lenders, non-preferential HMRC (rare post-2020), landlords for arrears and future rent, and unsecured judgment creditors.
Secured creditors (banks with fixed and floating charges), preferential creditors (employees for arrears; HMRC for VAT/PAYE/NIC from December 2020), retention-of-title suppliers over identified stock — unless each specifically consents.
Every creditor with a proof of debt gets a vote weighted by claim value. Connected creditors (directors, associates) vote but their votes are stripped out for the second 50% test.
Nominee fee £5k–£30k+, Supervisor's ongoing fee typically 8–12% of realisations. Duration 3–5 years is standard; longer CVAs face creditor resistance.
When a CVA actually works
CVAs succeed when the underlying business is viable but the balance sheet is broken. Classic patterns: a retailer with too many loss-making leases, a manufacturer that lost a major customer and needs 24 months to rebuild margin, a service business hit by one-off legal or tax debt. They fail when the business is fundamentally unprofitable — the CVA just delays the inevitable and burns creditor patience.
Directors who spot the problem early often have more tools available. See CVA vs administration to compare routes.
Frequently asked questions
What is a CVA?
A Company Voluntary Arrangement is a legally binding compromise between a company and its unsecured creditors, made under Part I of the Insolvency Act 1986. Creditors accept less than they are owed — typically a percentage over 3–5 years — in return for the company continuing to trade and pay under the agreed schedule.
Who can propose a CVA?
The directors of a solvent-or-insolvent company, an administrator of a company already in administration, or a liquidator of a company in liquidation. In practice, directors propose it while the company is still trading.
How is a CVA approved?
By a decision procedure of the unsecured creditors. A CVA is approved if 75% or more by value of creditors voting agree. A separate 50% test excludes connected-party votes: at least 50% of unconnected creditors must also vote in favour.
Do secured or preferential creditors have to accept a CVA?
No. A CVA cannot bind secured creditors' security or preferential rights without their explicit consent. HMRC's preferential claim for VAT, PAYE and NIC (from December 2020) is therefore ring-fenced unless HMRC agrees otherwise.
What about landlords?
Landlords are unsecured creditors for rent arrears and future rent losses. CVAs are frequently used to reduce rents across a portfolio (particularly in retail and hospitality). Landlords retain a right to challenge a CVA in court if it treats them unfairly compared with other creditors.
Who runs a CVA?
A licensed insolvency practitioner acts as Nominee (drafts and reports on the proposal) and then Supervisor (monitors compliance) if it is approved. Directors keep day-to-day control of the company.
How long does a CVA last?
Typically 3–5 years, matching the schedule of payments to creditors. Some retail CVAs are shorter, some SME CVAs run to 7 years.
What happens if the CVA fails?
The Supervisor issues a Notice of Failure. Creditors' rights revive — they can sue, wind up or demand full payment. In many cases the company enters administration or liquidation shortly after.