Company Voluntary Arrangement (CVA)
Save your insolvent company through a formal CVA agreement. Expert guidance on company voluntary arrangement meaning, process, and implementation for UK directors facing cash flow problems.
What is a Company Voluntary Arrangement?
A Company Voluntary Arrangement (CVA) is a legally binding agreement between an insolvent company and its creditors to repay debts over time, often at reduced amounts.
CVA Definition & Meaning
A CVA company voluntary arrangement is a formal insolvency procedure that allows companies to:
Key Features:
- • Repay creditors over 2-5 years
- • Often at less than 100% of debt
- • Directors remain in control
- • Business continues trading
- • Stops winding-up proceedings
Unlike liquidation, a company voluntary arrangement allows your business to survive while addressing financial difficulties through structured debt repayment.
When is a CVA Used?
Company Insolvency
When unable to pay debts as they fall due
Viable Business Model
Core business can be profitable with restructuring
Avoid Liquidation
Preserve jobs, contracts, and business relationships
Stop Legal Action
Halt winding-up petitions and enforcement
Company Voluntary Arrangement Process
Assessment
Review financial position and viability
Proposal
Prepare CVA proposal with business plan
Creditor Vote
75% approval by value required
Implementation
Supervised repayment over 2-5 years
Assessment
Review financial position and assess viability for CVA
Proposal Preparation
Develop comprehensive CVA proposal and business plan
Creditor Voting
Creditors vote on proposals - 75% approval needed
Implementation
Supervised repayment plan over agreed period
CVA Advantages and Disadvantages
Understanding the benefits and limitations of company voluntary arrangements helps you make informed decisions.
CVA Advantages
Business Survival
Company continues trading and preserves jobs
Director Control
Directors remain in control of the business
Legal Protection
Stops winding-up petitions and enforcement action
Creditor Relations
Better returns for creditors than liquidation
Flexible Terms
Affordable payment plans tailored to cash flow
Debt Reduction
Often repay less than 100% of original debt
CVA Disadvantages
High Failure Rate
Many CVAs fail due to over-optimistic proposals
Public Record
CVA status visible at Companies House
Credit Difficulties
Harder to obtain supplier credit post-CVA
Restricted Flexibility
Ongoing obligations and supervisor oversight
Stakeholder Impact
May affect customer and supplier confidence
Exit Restrictions
Difficult to sell shares during CVA period
CVA Requirements & Eligibility
Not every company qualifies for a CVA. Understanding the requirements ensures you explore the right options.
Company Must Be Insolvent
Four Tests of Insolvency:
- • Unable to pay debts as they fall due
- • Liabilities exceed assets
- • Unsatisfied statutory demand
- • Outstanding court judgment
Business Must Be Viable
Viability Factors:
- • Profitable core business model
- • Realistic cash flow projections
- • Achievable cost reductions
- • Market demand for products/services
Creditor Support Needed
Approval Requirements:
- • 75% approval by debt value
- • 50% of unconnected creditors
- • Realistic repayment proposals
- • Better than liquidation returns
Is Your Company Suitable for a CVA?
Good CVA Candidates
Poor CVA Candidates
K2's CVA Implementation Services
With over 30 years of experience, K2 has successfully implemented CVAs for hundreds of companies, helping them restructure debt and return to profitability.
Our CVA Implementation Process
Comprehensive Assessment
Full financial review and viability analysis before recommending CVA
Business Restructuring
Operational improvements to ensure CVA success and long-term viability
Creditor Negotiation
Professional representation to secure maximum creditor support
Ongoing Support
Continued guidance throughout CVA implementation and beyond
Proven CVA Results
Recent CVA Success:
Manufacturing company with £5m debt achieved 100% creditor approval, repaying 45p in the pound over 4 years while preserving 120 jobs.
Investment Partnership for CVAs
K2's unique investment approach means we share the risk and reward of your CVA success. Unlike traditional advisors who charge fees regardless of outcome, we invest in your turnaround.
When additional funding is needed to support the CVA or accelerate recovery, we provide growth capital as loans or equity investment, ensuring your CVA has the best chance of success.
Why Choose K2 for CVAs?
- • Proven track record with complex restructurings
- • Investment capital available to support CVAs
- • Success-based fee structures align our interests
- • Dedicated partner throughout the process
- • Post-CVA growth support and guidance
CVA vs Other Insolvency Options
Understanding how CVAs compare to other insolvency procedures helps you choose the right path for your company.
Company Voluntary Arrangement
Administration
Liquidation
CVA Frequently Asked Questions
Common questions about Company Voluntary Arrangements explained
What does CVA stand for and what is its meaning?
CVA stands for Company Voluntary Arrangement. It's a formal insolvency procedure that allows an insolvent company to reach a legally binding agreement with its creditors to repay debts over an extended period, often at reduced amounts. The CVA meaning encompasses debt restructuring while keeping the business operational.
How long does a CVA process take to implement?
The CVA process typically takes 6-12 weeks from initial assessment to creditor approval. This includes preparing the proposal (4-6 weeks), creditor voting period (28 days), and implementation. However, urgent cases can be expedited, especially when facing winding-up petitions.
What happens if creditors reject the CVA proposal?
If the CVA proposal fails to achieve the required 75% approval, you have several options: modify the proposal based on creditor feedback, explore alternative insolvency procedures like administration, or consider liquidation. K2 helps develop contingency plans before creditor meetings to ensure backup options.
Can a company in voluntary arrangement still trade normally?
Yes, a company in voluntary arrangement continues trading under director control, but with certain restrictions. You must comply with CVA terms, pay ongoing liabilities on time (especially HMRC), provide regular reports to the supervisor, and cannot pay dividends to shareholders during the CVA period.
What are the main reasons CVAs fail?
The main CVA failure reasons include over-optimistic financial projections, inadequate cost reduction, poor cash flow management, and failure to address underlying business problems. Success requires realistic proposals backed by fundamental business restructuring and ongoing professional oversight.
Ready to Explore a Company Voluntary Arrangement?
With over 30 years of CVA experience, K2 has the expertise to assess your company's suitability, develop realistic proposals, and guide you through successful implementation.
Confidential consultation • Investment partnership approach • 30+ years of CVA expertise