What is a Company Voluntary Arrangement?
What is a Company Voluntary Arrangement?
A Company Voluntary Arrangement, commonly referred to as a CVA, is a formal insolvency procedure that allows a company to repay its debts over an agreed period of time. For many businesses experiencing financial pressure, a CVA can provide the opportunity to continue trading while working towards a more stable financial position.
A CVA may help a viable business avoid liquidation by creating an affordable repayment plan for creditors. Seeking professional advice as early as possible is important, as this can help directors understand the options available and improve the chances of a successful outcome.
At BRI Business Recovery and Insolvency, our experienced Insolvency Practitioners work closely with company directors to provide confidential advice and practical support tailored to their individual circumstances.
What Is a Company Voluntary Arrangement (CVA)?
A Company Voluntary Arrangement is a legally binding agreement between a company and its creditors. It is designed to help businesses manage outstanding debts through affordable monthly/regular repayments over an agreed period, while allowing the company to continue trading.
The process is supervised by a licensed Insolvency Practitioner, who works with the company to assess its financial position and prepare a proposal for creditors. Once approved, the CVA becomes legally binding for the creditors included within the arrangement.
A CVA is generally considered where a business remains viable but is struggling with existing debt levels, creditor pressure, or cash flow problems. Rather than forcing the company into liquidation, the arrangement aims to provide breathing space and support long term recovery.
You can learn more about this process on our Company Voluntary Arrangement service page.
How Does a Company Voluntary Arrangement Work?
The CVA process is structured and carefully managed to give companies the best possible opportunity to recover financially. At BRI Business Recovery and Insolvency, our Insolvency Practitioners work closely with directors throughout the process, helping them understand their position and recommending the most appropriate course of action for the business.
Step 1: Assessing the Company’s Financial Position
The first stage of the CVA process involves a detailed review of the company’s finances. This includes assessing outstanding debts, reviewing cash flow, understanding creditor pressure, and determining whether the business is fundamentally viable moving forward.
During this stage, it is important to gain a clear understanding of the company’s ability to meet future obligations while maintaining day to day trading activities.
Step 2: Preparing a CVA Proposal
If a CVA is considered appropriate, a formal proposal is prepared for creditors by your insolvency practitioner. This proposal outlines how much the company can realistically afford to repay and over what period of time.
Repayments are usually made in monthly instalments (there are often seasonal fluctuations), and the arrangement commonly lasts between three and five years. The proposal should be realistic, sustainable, and structured in a way that gives creditors confidence in the company’s recovery plan.
Step 3: Creditor Approval
Once the proposal has been prepared, creditors are invited to vote on whether to accept the arrangement. For the CVA to be approved, at least 75% of voting creditors by value of debt must agree to the proposal.
If approved, the CVA becomes legally binding on all creditors within the arrangement, even those that didn’t vote or voted against. This can help protect the company from further creditor action while repayments are maintained in accordance with the agreed terms.
Continuing to Trade During a CVA
One of the key advantages of a CVA is that the business usually continues trading throughout the arrangement. Directors will continue in their roles as usual and remain in control of the company’s day to day operations, helping to preserve customer relationships, contracts, and employment where possible.
At BRI Business Recovery and Insolvency, we understand that every business faces different challenges. Our team works closely with directors throughout the process, providing practical guidance and support at every stage. If you would like further information about whether a CVA may be suitable for your company, our team is available to help.
When Might a Company Use a CVA?
A CVA may be considered where a company is experiencing financial difficulties but still has a realistic prospect of recovery. In many cases, the underlying business remains viable, but existing debt levels or a significant bump in the road are making it difficult to move forward.
Common situations where a CVA may be used include:
- HMRC arrears
- Supplier pressure
- Cash flow difficulties
- Historic debt burdens
- Recovering businesses requiring additional breathing space
For some companies, a CVA can provide the structure needed to regain financial stability while continuing normal trading activities. Seeking advice early is often important, as delays can reduce the number of available options.
At BRI Business Recovery and Insolvency, we work closely with directors to fully understand their circumstances and identify the most appropriate solution for their business. Every situation is different, and our approach is always tailored to the needs of the company involved.
What Are the Advantages of a CVA?
A CVA can offer several important advantages for businesses facing financial pressure.
One of the main advantages, that many of our clients benefit from, is that the company can usually continue trading while repaying debts through an affordable repayment structure. This can help preserve jobs, maintain customer relationships, and protect the value of the business where possible.
A CVA may also help businesses avoid liquidation, providing time to stabilise cash flow and improve financial management. Once approved, the arrangement can offer protection from further creditor action, helping directors focus on the future of the business rather than ongoing collection pressure.
For many companies, the ability to spread repayments over a manageable period can significantly improve day to day financial stability.
At BRI Business Recovery and Insolvency, our processes are built around providing practical and realistic support for businesses in financial difficulty. We take the time to understand each company’s circumstances and recommend solutions that are appropriate for their individual position. Our experienced team will guide directors through every stage of the process and provide ongoing support throughout the arrangement.
Are There Any Disadvantages to a Company Voluntary Arrangement?
While a CVA can be an effective solution in the right circumstances, it may not be suitable for every business.
The arrangement requires creditor approval, and the company must be able to maintain agreed repayments throughout the term of the CVA. Failure to meet ongoing obligations could place the arrangement at risk and may lead to a failure of the arrangement resulting in liquidation.
As a formal insolvency procedure, a CVA is also publicly recorded. In some situations, suppliers or lenders may review existing credit arrangements following approval of the proposal.
Professional advice is therefore important before proceeding with any formal insolvency process. At BRI Business Recovery and Insolvency, we provide a range of insolvency and restructuring solutions tailored to different business circumstances. If a CVA is not considered appropriate for your company, we will work with you to explore alternative options and help identify the best possible route forward, please contact us today for more information.
Speak to BRI About Your Company
If your company is experiencing financial pressure, seeking professional advice early can help you better understand the options available and improve the likelihood of achieving a positive outcome.
At BRI Business Recovery and Insolvency, our experienced Insolvency Practitioners provide confidential, practical, and tailored advice to directors across a wide range of industries. We take the time to understand your circumstances and work closely with you to identify the most appropriate solution for your business.
Whether you are considering a Company Voluntary Arrangement or exploring alternative restructuring options, our team is here to help you move forward with confidence. Contact BRI today for confidential, no obligation advice about your business.