When your business is under financial pressure, liquidation can feel like the only way out. But it isn’t always. In some cases, a Company Voluntary Arrangement (CVA) could allow you to keep trading while repaying your debts in a more manageable way.
A CVA is one of the UK’s formal insolvency solutions. It’s a legal agreement between your company and its creditors, setting out affordable repayment terms over time. If approved, it could stop legal action, give you breathing space and help you work towards recovery.
How does a Company Voluntary Arrangement work?
A Company Voluntary Arrangement is a contract, approved by your creditors and overseen by a licensed insolvency practitioner. It usually runs for between three and five years. During this time, you make monthly repayments into the arrangement. These funds are then distributed fairly to your creditors.
For a CVA to go ahead, at least 75% (by value) of voting creditors need to agree to it. Once approved, the CVA binds all unsecured creditors — even those who voted against it. As part of the Company Voluntary Arrangement, you can also apply for a moratorium that stops the threat of immediate legal action from the included creditors.
When is a CVA suitable?
A CVA is most likely to be approved and successful if:
- Your company has a viable core business with potential to return to profitability
- You can demonstrate a clear repayment plan, based on reliable cash flow
- Creditors stand to receive more through a CVA than they would through liquidation
- There’s strong creditor support, especially from large suppliers or HMRC
HMRC in particular plays a big role in Company Voluntary Arrangements. They’re one of the UK’s largest creditors and are often owed PAYE, VAT or Corporation Tax. While HMRC won’t agree to every CVA proposal, they will often support one if it’s realistic, fair and shows that creditors will get more than they would in liquidation.
When a CVA isn’t the answer
A CVA isn’t always the right option. If your business is fundamentally unviable, or if cash flow has collapsed to the point you can’t meet even reduced repayments, creditors are unlikely to support the proposal.
It also isn’t suitable if directors are looking for a clean break. If the company has no realistic path to recovery, a Creditors’ Voluntary Liquidation (CVL) is often the most responsible option.
Can a Bounce Back Loan be included?
Yes. A Bounce Back Loan, like other unsecured company debts, can be included in a CVA. This means you won’t have to treat them separately. They can be rolled into the repayment plan alongside trade creditors, suppliers and HMRC debts.
This is a major benefit for directors who took out a Bounce Back Loan in good faith but now can’t keep up with repayments. Including them in a CVA can make the debt more manageable, rather than forcing your company into liquidation.
Benefits of a CVA
If your company qualifies, a CVA can offer real advantages:
Protection from creditors – once approved, creditors can’t take separate legal action against you for included debts
Keep trading – unlike liquidation, you stay in control of your company and continue operating
Affordable repayments – payments are tailored to what the business can realistically afford
Debt forgiveness – once the CVA ends, remaining unsecured debts included in the arrangement are written off
For directors determined to save their company, these benefits can make a CVA an attractive alternative to liquidation.
Risks and challenges
Like any formal insolvency process, a Company Voluntary Arrangement has downsides to weigh carefully:
Creditor approval isn’t guaranteed – you need the majority of creditors to agree
Commitment to payments – if you default, the CVA can fail and liquidation may follow
Public record – CVAs are listed on the Insolvency Register, which can impact reputation
Limited flexibility – once in place, the repayment structure can be difficult to renegotiate
If a CVA fails, because repayments can’t be maintained or creditors lose confidence, the most common outcome is liquidation. At that point, directors will usually need to consider a CVL to close the company in an orderly way.
What does a CVA mean for directors?
Directors usually remain in control of the day-to-day running of the company during a CVA. You don’t automatically lose your position but you do work closely with the insolvency practitioner, who monitors payments and reports back to creditors.
Unlike personal insolvency processes, a CVA doesn’t directly impact your personal credit rating. However, as a director, you may find it harder to access new company finance during the arrangement. Some suppliers may also adjust their terms once they know the company is in a Company Voluntary Arrangement.
That said, entering a CVA demonstrates responsibility and transparency, qualities that creditors often respect. It shows you’re not avoiding debts but actively working to repay them.
What happens at the end of a CVA?
If the company completes the CVA successfully, any remaining unsecured debts included in the arrangement are written off. Your business continues trading without those legacy liabilities holding it back.
If the company has stabilised during the Company Voluntary Arrangement, you’ll emerge in a stronger financial position with a far lighter debt burden. For many directors, this means a genuine second chance to rebuild the company’s future.
CVA vs liquidation: what’s the difference?
At first glance, CVAs and liquidation both deal with company debt. The key difference is the outcome.
CVA – the company continues trading, repays creditors over time, and has the chance to recover.
Liquidation – the company closes, assets are sold and debts are written off. Directors may be able to start again with a new company.
Neither option is automatically better than the other. It depends on your company’s financial health, creditor support and your goals as a director.
We’re here to guide you through a CVA
The sooner you get advice, the more options you’ll have. If you wait until creditors are issuing statutory demands or winding-up petitions, a CVA may no longer be possible. By acting early, you keep the door open to multiple solutions: whether that’s a CVA, restructuring, or a managed liquidation.
If you’re wondering whether a CVA could save your company, the best step you can take is to talk it through with our licensed insolvency practitioners. We’ll explain what each route means in practice, for you personally, your company and your creditors.
We know how stressful this decision can feel. You don’t need to make it alone. Call us today for free, confidential advice and take control of your next step.
