Viability
A CVA cannot repair a business that continues to generate unsustainable losses.
Company voluntary arrangement (CVA)
A binding restructuring proposal for a viable company.
A CVA can compromise historic unsecured debts while the company continues to trade. It requires a credible proposal, sustainable future cash flow and the necessary creditor and shareholder approvals.
Before the first call
Test whether the company can trade through the proposal.
- Bring current tax, payroll and key supplier obligations into the cash flow forecast.
- Prepare realistic forecasts with downside assumptions, not only the best-case outcome.
- Identify the historic debt, creditor mix and the contribution the business can genuinely afford.
When it may apply
A CVA may work where the problem is historic debt, not a failed business model.
The correct route depends on the full financial and commercial position. These indicators are a starting point, not a substitute for advice.
- The underlying business can trade profitably
- Future taxes and operating costs can be paid on time
- Historic unsecured debt is the principal pressure
- Reliable forecasts support the proposed contributions
- Directors and key stakeholders support the turnaround plan
- Creditors are likely to receive a better outcome than the alternative
Points to consider
What the board needs to understand.
We explain both the intended benefit and the practical implications before a decision is made.
Creditor approval
The statutory voting thresholds and connected creditor rules must be satisfied.
Secured and preferential creditors
Their rights are not compromised without consent, and priority liabilities must be addressed.
Forecasting
Cash flow, profit assumptions and contribution levels must be realistic and capable of being monitored.
Compliance
The company must meet ongoing tax, filing and CVA obligations while continuing to trade.
Failure risk
If contributions or other terms are not met, the CVA may terminate and another insolvency procedure could follow.
The process
A clear sequence from advice to implementation.
- 01
Viability assessment
Review trading performance, causes of distress, forecasts, creditor composition and alternative outcomes.
- 02
Proposal design
Develop affordable terms, supporting information, controls and the directors' turnaround plan.
- 03
Creditor decision
Issue the statutory proposal and obtain the required creditor and shareholder approvals.
- 04
Supervision
The company continues trading and complies with the approved terms under the supervisor's oversight.
Common questions
What directors usually want to know.
Every company is different. These answers provide general guidance only.
Does a CVA write off debt?
A proposal may compromise part of the unsecured debt, but the terms must be approved and deliver an outcome creditors are prepared to accept.
Can HMRC vote?
Yes. HMRC may be a significant creditor and will consider compliance, affordability, previous conduct and the treatment proposed.
Do directors remain in control?
The directors normally continue managing the company, subject to the CVA terms and the supervisor's functions.
What happens if the CVA fails?
The consequences are set out in the proposal and may include termination, creditor enforcement or another formal insolvency process.
A useful first step
Discuss the facts before deciding on a process.
Answer a small number of questions about the pressure facing the company. The initial discussion is free and without obligation. Fees for any formal work are explained before an instruction is accepted.