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person signing agreementOften referred to as a CVA a Company Voluntary Arrangement is a formal agreement between creditors and the company over repayment of the amount owed.  It is similar to an IVA (Individual Voluntary Arrangement) used by individuals who have debt problems.

When a company is in financial difficulties it can propose a CVA.  It is a less severe form of insolvency compared to Administration or Liquidation.

What form does a CVA take?

Usually a CVA will propose to contribute a certain percentage of its profits over a period of 3 years.  It may also include some third party investment.  Usually the company will have to make monthly contributions to the person supervising the arrangement as payment on account of the profits.

The result of the CVA is that creditors receive a certain proportion of their debt over the period.  This amount is usually between 25p and 75p in the but can be more or less.  When the CVA has successfully completed (after the 3 years) the balance owed to creditors is legally written off and creditors can no longer pursue the company for the balance.

At the end of the CVA the company is restored to solvency and shareholders are left with a more valuable business.


A CVA proposal is drafted by the management team.  This is usually done with the assistance of an Insolvency Practitioner who has experience in dealing with such legal documents.

The CVA proposal will include a Statement of Affairs detailing the assets and liabilities of the company, an estimated outcome statement comparing the outcome to creditors of a CVA to liquidation and detailed financial projections.

Once completed this document is filed in court and circulated to creditors.

Creditors decide whether they wish to approve the terms of the proposal at a meeting and if more than 75% of those that vote agree then all creditors (except secured) are bound to the terms of the proposal.

The company would then have to stick to its side of the agreement.  After a certain period of time outlined in the proposal the Supervisor would make a distribution to creditors.  This is usually after at least 1 year and several may be made over the duration of the CVA.

During the period of the CVA, the company may be restricted in terms of paying dividends to shareholders, incurring additional credit, refinancing etc.


After approval the company must adhere to the agreed terms or the CVA will fail.  If it fails the Supervisor of the arrangement may have to petition for the company’s liquidation or administration.

Once the terms of the proposal have been implemented the business is returned to solvency and can trade normally.


  • Directors retain control of the business
  • Shareholders maintain ownership of the company
  • No investigation into the conduct of directors
  • Normally results in some debt forgiveness
  • Can be very flexible

Contact us if you require assistance in placing your business into a CVA  or require any advice as to the appropriate solution for your business 

You can also learn more about the CVA process at www.voluntaryarrangement.org.uk/cva.php

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