What Is a Company Voluntary Arrangement (CVA) and Is It Right for My Business?

Reviewed by Richard Curtin, Senior Consultant Solicitor, Setfords Law, Published: 3rd August 2026, Last reviewed: 29th July, Read time: 8 minutes

A Company Voluntary Arrangement, or CVA, lets an insolvent but viable company pay its creditors over a fixed period while it carries on trading. It’s one of the few insolvency routes where directors keep running the business throughout. Here’s how it works, what creditors need to agree, and how to tell if it fits your situation.

Key takeaways

• A CVA is an agreement between an insolvent company and its unsecured creditors to repay debts over a set period, typically up to five years.
• Directors stay in control of the business throughout. A licensed insolvency practitioner oversees the process rather than replacing management.
• Creditors representing at least 75% of the debt value who vote must approve the proposal for it to go ahead. It must also not be opposed by more than 50% of unconnected creditors. It then binds every unsecured creditor.
• A CVA doesn’t automatically give the company a moratorium on creditor action, unlike administration.
• It works best where the underlying business is viable and can afford the agreed payments, not as a way to delay an inevitable closure.

A Company Voluntary Arrangement is a formal insolvency procedure. It lets an insolvent limited company agree a legally binding repayment plan with its creditors, while continuing to trade under its existing directors. It’s set out in the Insolvency Act 1986.

The process is run by a licensed insolvency practitioner, but unlike liquidation or administration, the company’s directors keep control day to day. Once the required threshold of creditors agrees to the proposal, it becomes binding on every unsecured creditor, including those who voted against it or didn’t vote at all.

A CVA suits a company that has a viable underlying business, but a debt burden that current trading can’t service. If there’s no realistic prospect of the business recovering, a CVA isn’t the right tool, and liquidation is more likely to be appropriate.

Key figures

75% · 5 years · 6 to 8 weeks

A CVA needs creditors representing at least 75% of the debt value, by those who vote, to approve it before it becomes binding. It must also not be opposed by more than 50% of unconnected creditors, meaning those with no personal or financial ties to the company. Both thresholds are measured by value of debt, not by the number of creditors.

Repayment periods typically run up to five years, though terms vary case by case. Most CVAs take somewhere in the region of six to eight weeks, from appointing an insolvency practitioner to a creditor vote. This is a practitioner estimate rather than a fixed rule. Some cases run longer, with certain practitioners citing up to ten weeks depending on how complex the company’s affairs are.

(These are typical figures reported by insolvency practitioners rather than fixed rules in every case. [TO CONFIRM] Confirm current thresholds and timings with your insolvency practitioner. They can vary with the circumstances.)

How a CVA works

Stages can overlap in practice, particularly preparing the proposal and negotiating informally with major creditors.

1. Instruct a licensed insolvency practitioner. The board of directors must agree to proceed, then appoint an insolvency practitioner to act as “nominee.” The nominee prepares and reports on the proposal before it goes to creditors. They review the company’s finances, debts and ongoing commitments as the starting point for a proposal.
   
2. Build the proposal. The nominee works with the directors to set out how much debt the company can realistically repay, and over what schedule, based on credible cash flow forecasts. This has to be achievable and grounded in real numbers, not optimism, since it will be tested by creditors and, if approved, has to be delivered.
   
3. Creditors and shareholders vote. The nominee writes to creditors and shareholders, setting out the proposal and inviting a vote. The proposal is approved if creditors representing at least 75% of the debt value who vote are in favour. It must also not be opposed by more than 50% of unconnected creditors.
   
4. The CVA is implemented. The nominee, or a replacement, becomes the “supervisor” of the arrangement, the person responsible for overseeing payments and reporting to creditors once the CVA is running. The company makes the agreed payments through the supervisor, who reports on progress to creditors and Companies House at regular intervals until the arrangement is completed.
   
5. The CVA concludes, or fails. If the company completes the agreed payments, the CVA ends and the company continues trading on a clean footing for those debts. If the company can’t keep up the payments, the arrangement can fail, which often leads to liquidation.

What happens at the creditor vote? Once the threshold is met, the CVA becomes legally binding on every unsecured creditor, whether or not they voted for it, and whether or not they voted at all.

Is a CVA right for your business?

A CVA tends to fit where:

• The underlying business is capable of trading profitably, but historic debt is the problem, not the business model itself.
• Directors want to stay in control and keep the company trading, rather than hand it to a liquidator or administrator.
• Creditors are more likely to recover more through a structured plan than through liquidation.
• The company can produce credible, evidence-based forecasts showing it can afford the proposed payments.

A CVA is less likely to fit where:

• The company has no realistic path back to profitability, whatever the debt position.
• Immediate protection from aggressive creditor action is needed. A CVA doesn’t come with an automatic moratorium in the way administration does. Directors can, however, obtain a standalone Part A1 Moratorium to secure a temporary breathing space while they prepare the CVA.
• A large proportion of debt is owed to a single creditor who’s unlikely to support the proposal, since 75% of debt value is a meaningful threshold to clear.

What slows a CVA down

Weak or unrealistic forecasts. Creditors, and HMRC in particular, scrutinise whether the proposed payments are achievable. A proposal built on optimistic assumptions is more likely to be challenged or rejected.

A poor compliance history. HMRC is a common creditor in CVAs. Its assessment often includes whether the company has a reasonable track record of tax compliance, and whether current management is considered competent to deliver the plan.

Concentrated debt with an unsupportive creditor. If one or two creditors hold a large share of the debt and oppose the plan, reaching the 75% threshold becomes much harder.

What helps a CVA succeed

Build forecasts an insolvency practitioner is confident defending. Realistic, well-evidenced numbers give creditors a genuine reason to vote in favour, rather than assume the worst.

Get your governance in order before proposing a CVA. Up-to-date filed accounts, current records, and clear reporting all signal to creditors that management is serious about delivering the plan.

Talk to your largest creditors informally before the vote. Understanding their concerns, and addressing them in the proposal, improves the chances of clearing the 75% threshold first time.

Working out whether a CVA is the right fit for your business depends on the specifics of your debts, your creditors, and your forecasts. Get a clear picture of where you stand, with no pressure to take things further, from our restructuring and insolvency team.

Common mistakes

1. Proposing a CVA to buy time rather than because the business is viable. Creditors and insolvency practitioners can usually tell the difference, and an unrealistic proposal is likely to fail. Fix: be honest about viability before committing to the process.
   
2. Underestimating HMRC’s influence. As a common and often significant creditor, HMRC’s vote can decide whether the 75% threshold is reached. Fix: engage with HMRC’s stated approach and compliance expectations early.
   
3. Treating the CVA as “done” once approved. A CVA that isn’t delivered can collapse into liquidation. Fix: build payment obligations into ongoing cash flow management, not only the initial proposal.
   
4. Not considering secured creditors’ rights. A CVA generally can’t affect a secured creditor’s right to enforce their security unless they agree to it. Fix: map out secured versus unsecured debt clearly before proposing terms.

When to speak to a solicitor

If your company is struggling with debt but you believe the underlying business is sound, explore whether a CVA, or another rescue option, fits before creditors take matters further. This is useful whether or not you go on to instruct Setfords.

Speak to a solicitor if:

• Your company can’t meet its current debt repayments but is otherwise trading profitably.
• Creditors are becoming more assertive, but you believe the business has a viable future.
• You want an honest, evidence-based view on whether your forecasts could support a CVA proposal.
• You’re weighing up a CVA against administration or liquidation and want to understand the practical differences.
• You need immediate breathing space from creditor pressure and want to explore how a Part A1 Moratorium can protect the company while a CVA is prepared.

FAQs

Does a CVA stop the company being wound up?

A CVA can be proposed at any point up until a winding-up order (a court order that forces the company to close) is granted. Once a winding-up order is made, compulsory liquidation generally takes over and a CVA becomes difficult to pursue.

Can a CVA be challenged after it’s approved?

Yes. Under section 6 of the Insolvency Act 1986, creditors can challenge a CVA within 28 days of the outcome being reported to court. The grounds are unfair prejudice, where the arrangement treats one creditor significantly less favourably than others without good reason. The other ground is a material irregularity, a significant procedural failing in how the process was run.

Do secured creditors have to agree to a CVA?

A CVA cannot affect a secured creditor’s right to enforce their security unless they specifically agree to it. Their support isn’t strictly required in the same way as unsecured creditors’ votes, but their position still needs careful handling.

What happens if the company can’t keep up CVA payments?

The supervisor and creditors will usually look at whether the arrangement can be varied. If it can’t be salvaged, the CVA can fail, which often results in the company moving into liquidation.

Is a CVA the same as an Individual Voluntary Arrangement (IVA)?

No. A CVA is for limited companies and LLPs (the Limited Liability Partnerships Regulations 2001 apply the CVA regime to LLPs). Sole traders and self-employed individuals use an Individual Voluntary Arrangement (IVA) instead, which follows a broadly similar principle but is a separate personal insolvency process.

ABOUT THE AUTHOR:

Richard Curtin, Senior Consultant Solicitor, has over 35 years’ experience specialising in contentious and non-contentious insolvency and restructuring, advising clients from sole practitioners to the Big Four. He acts for creditors, debtors, directors, and investors, with particular experience in LPA Receiverships, often working alongside real estate colleagues to secure the best outcome for both the officeholder and the appointor.

This article is general information about Company Voluntary Arrangements in England and Wales and is not legal advice. The law can change and every company’s situation is different, so please speak to a qualified insolvency solicitor about your circumstances.