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If your business is facing financial difficulties but still has the potential to recover, a company voluntary arrangement, also known as a creditors voluntary arrangement, could help you move forward. A company voluntary arrangement CVA is a formal way to deal with debt, giving you time and structure to repay creditors while continuing to trade.
This type of voluntary arrangement creates a legally binding agreement between your company and its creditors, allowing you to manage repayments over a longer period. In this guide, we explain how the CVA process works, when it may be suitable, and what it means for your business.
At Frost Group, we provide clear, practical advice to help you understand your options and take the right next step.
A company voluntary arrangement is a formal procedure under the Insolvency Act that allows a business to reach an agreement with its creditors to repay debts over time. It is designed for companies experiencing financial pressure but with a viable core business that can generate income and continue trading.
The process begins with a CVA proposal, which sets out how much the company can afford to repay and over what period. This proposal is reviewed by creditors, who vote on whether to approve it. If agreed, it becomes a legally binding agreement between the company and its creditors.
An insolvency practitioner is appointed to oversee the arrangement, acting as both nominee and supervisor. They help prepare the proposal, manage the process, and ensure payments are made in line with the agreed terms.
A company voluntary arrangement is often considered when a business is under pressure from debt but still has a viable core business. If your company can generate income and continue trading, a CVA may offer a better outcome than liquidation or other insolvency procedures.
Common signs include:
Acting early can make a big difference. A CVA gives you breathing space to restructure repayments and focus on recovery, while protecting the interests of creditors.
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The CVA process is designed to create a structured repayment plan that works for both the company and its creditors. It begins with an insolvency practitioner assessing the company’s financial position and preparing a proposal based on what the business can realistically repay.
This proposal is then put forward to creditors, who vote on whether to approve it. If the CVA is approved, it becomes a legally binding agreement, and the company continues to trade while making agreed repayments over time under supervision.
The process begins with preparing a CVA proposal. An insolvency practitioner works with the company to assess its financial position, including cash flow, assets, and debt levels. The aim is to create a realistic plan that sets out how much the business can repay and over what period.
This proposal must be achievable and offer a fair return to creditors. A well-prepared proposal increases the chances of approval and gives the business a clear path towards recovery.
Once the proposal is complete, it is shared with creditors ahead of a formal creditors meeting. At this stage, creditors review the proposal and decide whether to accept the terms.
For the CVA to be approved, at least 75% in value of those creditors who vote must agree. If this threshold is met, the arrangement is approved and becomes legally binding on all creditors, including those who did not vote.
Once approved, the arrangement becomes legally binding and may be reported to the Insolvency Service. From this point, any existing legal actions are paused, giving the business breathing space to focus on recovery.
Creditors are bound by the terms of the CVA and must follow the agreed repayment plan. This protection allows the company to continue trading without ongoing pressure, as long as it meets the terms of the arrangement.
After approval, the company makes regular repayments to creditors over the agreed period. An insolvency practitioner acts as supervisor, ensuring the terms of the CVA are followed and payments are made on time.
Directors remain in control of the business and continue to manage day-to-day operations. As long as the company keeps up with repayments, it can trade as normal and work towards long-term recovery.
A company voluntary arrangement can offer a practical way to deal with debt while keeping the business trading. It focuses on recovery and provides a structured route to repay creditors over time.
Key benefits include:
A CVA can also form part of a wider business restructure to improve cash flow and support long-term recovery.
While a CVA can be effective, it may not be suitable for every business. There are some important factors to consider before proceeding.
Taking advice early can help you decide whether this is the right option for your situation.
A company voluntary arrangement is suitable for a business that is struggling with debt but still has a viable future. The company does not have to be fully insolvent, but it must be able to generate income and make regular repayments to creditors.
To be eligible, the company should:
An insolvency practitioner will review the company’s position and confirm whether a CVA is appropriate.
A CVA is one of several insolvency procedures available, and the right option depends on the company’s situation.
A CVA is often chosen where the business has a realistic chance of recovery and can offer a better outcome than other insolvency processes.
The cost of a company voluntary arrangement will depend on the complexity of the business and the level of work involved. This includes preparing the proposal, managing the creditors meeting, and supervising the arrangement over time.
Costs are usually based on the size of the debt, the number of creditors, and how complex the company’s affairs are. In many cases, fees are built into the repayment plan, so they are paid as part of the arrangement rather than upfront.
A CVA can usually be set up within a few weeks, depending on how quickly the proposal is prepared and reviewed. Once approved, the arrangement typically runs over a longer period, often between three to five years.
The exact timeline will depend on the company’s financial position and the agreed repayment terms. During this time, the business continues to trade while making regular payments to creditors.
If a company cannot keep up with the agreed repayments, the CVA may fail. If the CVA fails, further action may be taken and the company’s position may be updated with Companies House.
In some cases, creditors may seek to appoint administrators or pursue liquidation. This is why it’s important that the proposal is realistic from the start and based on what the business can afford. Taking advice early can help reduce the risk of failure.
Choosing the right support during a company voluntary arrangement can make a real difference. At Frost Group, our experienced insolvency practitioner team provides clear, practical advice based on your company’s position, with support throughout the entire process.
If your business is under pressure from creditors, contact us today or call 0345 260 0101 for a confidential chat with our team. We support businesses across the UK and can help you explore your options, including voluntary arrangements, administration, and members voluntary liquidation.
Below are answers to some of the most common questions about a company voluntary arrangement and how the process works.
A company voluntary arrangement is a formal agreement between a company and the company's creditors to repay debts over time. It allows the business to continue trading while making affordable repayments, rather than facing immediate closure.
The process begins with an insolvency practitioner preparing a proposal based on what the company can afford to repay. This is then put to creditors for a vote. If approved, the company makes regular repayments over an agreed period under supervision.
Most CVAs run for a period of three to five years, depending on the level of debt and what the company can afford to repay. The exact length will be set out in the agreed proposal.
Yes, directors remain in control of the business and continue to manage day-to-day operations. The insolvency practitioner oversees the arrangement but does not take over running the company.
Yes, entering into a CVA will affect the company’s credit rating. It is a formal insolvency process and may impact how lenders, suppliers, and other parties view the business.
Secured creditors are usually not bound in the same way as unsecured creditors, as their lending is backed by assets. However, they may still be involved depending on the terms of the arrangement.
If creditors do not approve the proposal, the CVA will not go ahead. In this case, other options such as administration or liquidation may need to be considered.
Once a CVA is approved, it can stop or prevent certain legal actions from creditors. This gives the business breathing space to focus on repaying debts and continuing to trade.
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