What is a Company Voluntary Arrangement (CVA) and how does it work?

A Company Voluntary Arrangement, or CVA, is a legally binding agreement between a financially distressed company and its creditors. It allows the company to repay a proportion of its debts over an extended period, typically three to five years, while continuing to trade. The process is designed to give businesses breathing space, restructure their liabilities, and avoid liquidation. A CVA must be supervised by a licensed insolvency practitioner who acts as the nominee and later as the supervisor of the arrangement. Directors retain day-to-day control of the business, unlike administration where control shifts to the administrator. To propose a CVA, the directors work with the insolvency practitioner to prepare a detailed proposal outlining how creditors will be repaid, often from future trading profits or asset realisations. Creditors then vote on the proposal, and if 75% by value of those voting approve it, the CVA becomes legally binding on all unsecured creditors. This makes it a powerful tool for companies that are fundamentally viable but struggling with unsustainable debts.