Turnaround vs CVA vs Administration vs Liquidation
When your company is in distress, the most important decision you will make is which path to take. The wrong choice costs money, time, credibility — and sometimes the business itself. This guide cuts through the jargon to explain what each option actually means, who it works for, and how to decide.
Quick Decision Reference
Business is viable, time available
→ Operational Turnaround
Viable but creditor pressure is acute
→ CVA or Turnaround + CVA
Viable but needs legal protection now
→ Administration / Pre-Pack
Not viable — orderly exit needed
→ Liquidation
The First Question: Is the Business Viable?
Every decision about the right path flows from a single question: does this business have a viable core — a product or service people actually need and will pay for — that can generate sustainable profitability with the right structure and management?
If the answer is yes, then the goal is rescue: preserving that core through whatever combination of turnaround, restructuring, and formal procedure is necessary. If the answer is no — the business model is broken, the market has moved on, or the company cannot generate enough revenue to cover its costs at any realistic scale — then the goal shifts to an orderly exit that minimises losses.
Signs the Business Is Viable
- • Real customers who value and depend on your product/service
- • Revenue that covers costs at a sustainable scale
- • The distress is caused by identifiable, fixable problems
- • The market still exists and is not structurally declining
- • Management can be changed or supplemented to fix root causes
- • Creditors would receive more from a going concern than liquidation
Signs the Business May Not Be Viable
- • Revenue declining structurally — customers are not coming back
- • Business model requires costs that exceed achievable revenue
- • Market is contracting and competitors are failing too
- • Core product/service is obsolete or being displaced
- • No realistic path to covering debt service and overheads
- • Liquidation value exceeds going-concern value
Honestly answering this question requires external, experienced eyes. Directors are rarely objective about their own businesses — understandably so. K2's initial assessment provides the independent view that makes this question answerable.
Every Option Explained
Operational Turnaround (Informal)
Best for: Viable businesses where creditors can be managed without formal procedure
Operational turnaround addresses root causes directly — without formal legal procedure. It combines management intervention, cost restructuring, working capital improvement, and creditor negotiation. Critically, it preserves the existing legal entity: contracts remain in place, customer relationships are not disrupted, and directors retain control.
Director control
Retained throughout
Public record
None
Creditor agreement
Voluntary — needs cooperation
Contracts / licences
Unaffected
Typical timeline
12–36 months
Professional cost
£20k–£100k+
Company Voluntary Arrangement (CVA)
Best for: Viable businesses needing to legally bind creditors to a repayment plan
A CVA is a formal insolvency procedure (though the company does not enter insolvent administration) that allows a company to propose a binding repayment plan to unsecured creditors. Once approved by 75% of creditors by value, it binds all unsecured creditors — including those who voted against. Directors remain in control. The company continues to trade.
Director control
Retained
Public record
Yes — Companies House
Creditor agreement
75% binds all unsecured
Contracts / licences
May trigger change-of-control clauses
Typical duration
3–5 year repayment
Professional cost
£15k–£35k (IP fees)
Key risk:
CVAs fail approximately 50% of the time. A CVA that restructures debt without fixing the underlying trading problem will collapse — leading to administration or liquidation. CVA is a financial tool, not an operational fix. It must be paired with genuine operational turnaround to work.
Administration
Best for: Viable businesses needing legal protection while a sale or rescue is arranged
Administration places an insolvency practitioner in control of the company. Directors' powers are suspended. An automatic moratorium prevents creditor enforcement. The administrator must act in the interests of creditors — their primary objective is to rescue the company as a going concern if possible, or achieve a better result for creditors than liquidation.
Director control
Suspended (IP in control)
Public record
Yes — significant
Creditor protection
Automatic moratorium
Contracts / licences
Often terminated on appointment
Typical duration
12 months (extendable)
Professional cost
£25k–£150k+
Pre-Pack Administration
Best for: Businesses where a quick transfer of assets to a newco is the best rescue route
A pre-pack is a sale of the business and assets arranged before administration and completed immediately on the administrator's appointment. It allows the business to continue with minimal disruption — employees, customers and key contracts transfer to a new company. The old company enters administration and is wound down.
Director control
Suspended briefly; often transferred to newco
Public record
Yes — old company
Speed
Days (vs months)
Regulatory note (2021):
Connected party pre-packs (where existing management buy the business) now require either independent review by a Pre-pack Pool evaluator or creditor approval. This has reduced phoenix-company abuses but added complexity. Professional advice is essential.
Part 26A Restructuring Plan
Best for: Larger businesses with complex creditor structures needing court-sanctioned restructuring
Introduced by the Corporate Insolvency and Governance Act 2020, the Restructuring Plan allows companies to propose a cross-class restructuring that can be sanctioned by the High Court and bind dissenting creditor classes through "cram-down". Directors retain control. This is a sophisticated tool — used in the DSTBTD case K2 was involved in — requiring significant legal and financial resource.
Minimum scale
Typically £10m+ debt
Professional cost
£200k–£1m+
Timeline
6–18 months
Creditors' Voluntary Liquidation (CVL)
Best for: Businesses that are not viable — orderly exit to maximise creditor return
A CVL is a formal process where directors voluntarily resolve to wind up the company. An insolvency practitioner is appointed as liquidator, assets are realised, creditors are paid in statutory order (secured → preferential → unsecured → shareholders). The company ceases to exist. For directors, a CVL is preferable to compulsory liquidation — it demonstrates they acted responsibly.
Director control
Ends on appointment
Public record
Yes — permanent
Personal guarantees
Called in full
Side-by-Side Comparison
| Factor | Turnaround | CVA | Administration | Pre-Pack | Liquidation |
|---|---|---|---|---|---|
| Director retains control | Yes | Yes | No | Partly | No |
| Company continues trading | Yes | Yes | Usually briefly | Via newco | No |
| Public record | None | Yes | Yes | Yes | Yes |
| Binds dissenting creditors | No | 75% rule | Moratorium | Moratorium | Statutory order |
| Preserves equity value | Yes | Possibly | Rarely | Sometimes | No |
| Personal guarantees | Negotiable | Remain | Remain | Old co only | Called in full |
| Typical professional cost | £20k–£150k+ | £15k–£35k | £25k–£150k+ | £20k–£60k | £5k–£25k |
| Requires insolvency practitioner | No | Yes | Yes | Yes | Yes |
How to Decide: Key Questions
Work through these questions in order. Your answers determine the right approach.
Question 1
Is the business viable at its core?
Yes →
Continue to Question 2. Rescue is the goal.
No →
Creditors' Voluntary Liquidation (CVL). Minimise losses and director exposure.
Question 2
Do you have time and creditor cooperation?
Yes →
Informal operational turnaround. No formal procedure needed. Fastest, cheapest, most private.
No →
Continue to Question 3. A formal procedure may be needed to buy time.
Question 3
Can creditors be bound with a repayment plan?
Yes (75% likely to agree) →
CVA combined with operational turnaround. Directors retain control.
No (creditors too hostile or fragmented) →
Continue to Question 4. Legal protection needed.
Question 4
Is the business best rescued in its existing form or via a newco?
Existing form →
Full Administration. IP in control; moratorium protects business while rescue is arranged. Higher cost, more disruption.
Via newco (clean start) →
Pre-Pack Administration. Business assets transfer quickly to newco; old company wound down. Requires Pre-pack Pool review if management-connected.
Frequently Asked Questions
What is the difference between turnaround and insolvency?
Turnaround aims to rescue the existing company — its legal entity, contracts, employees — through operational and financial restructuring. Insolvency procedures are formal legal processes governed by an insolvency practitioner whose primary duty is to creditors. Some insolvency procedures (CVA, pre-pack) can facilitate rescue, but they operate under different rules and incentives than independent turnaround work.
When is a CVA better than turnaround?
A CVA is better when creditors are not cooperating voluntarily or there are too many to negotiate individually. The CVA legally binds all unsecured creditors once 75% approve. However, CVA works alongside turnaround — not instead of it. A CVA that restructures debt without fixing trading will fail.
What happens to directors in administration?
When a company enters administration, an insolvency practitioner takes control. Directors' powers are suspended, though management often continue in operational roles. The administrator's duty is to creditors. Directors face conduct investigation after administration — if the company traded while insolvent without reasonable prospect of recovery, directors may face wrongful trading claims or disqualification.
Is turnaround always cheaper than insolvency?
Not always in direct professional costs. But turnaround almost always produces better outcomes: equity preserved, personal guarantees potentially negotiated, ongoing relationships maintained, director reputation protected. The total economic cost of liquidation — lost equity, called guarantees, reputational damage — typically far exceeds turnaround costs.
Can I choose between administration and liquidation?
In practice, this depends on whether there is going-concern value. Administration is appropriate when the business (or parts of it) can be sold as a going concern. Liquidation is appropriate when assets are worth more individually. Lenders with floating charges can usually appoint administrators without court involvement, effectively controlling which procedure is used.
Not Sure Which Path Is Right?
K2 Business Partners has helped UK companies through every one of these scenarios. Our first step is always an honest assessment of which path gives your business the best chance. There is no charge for this conversation.
30+ years turnaround experience · Company rescuers, not insolvency practitioners
Related Guides
Go deeper on each option — detailed guides on CVA, administration, and turnaround finance.
Company Restructuring Guide
Full guide to saving your company — what restructuring involves and how it works
Company Voluntary Arrangement (CVA)
Complete CVA guide — what it is, how it works, and when it's appropriate
Pre-Pack Administration
How pre-pack administration works and when it's the right rescue route
Turnaround Finance
Emergency funding options for businesses in financial distress