What is a Company Voluntary Arrangement (CVA)?

A Company Voluntary Arrangement, often called a CVA, is a formal way for a company in financial difficulty to make a legally binding agreement with its creditors about how to repay its debts. It can help a business avoid insolvency and continue trading while dealing with what it owes.

A CVA is open to limited companies and limited liability partnerships (LLPs) that cannot pay their debts as they fall due. It is overseen by a licensed insolvency practitioner, who works with the directors to prepare a proposal and then puts it to the company’s creditors for a vote.

For a CVA to go ahead, at least 75% (by value) of the creditors who vote must agree to the proposal. If approved, the arrangement becomes binding on all eligible creditors, even those who voted against it or did not vote at all.

A CVA usually involves the company agreeing to pay creditors over a fixed period, often on reduced terms, based on what the business can afford. The aim is to give the company breathing space to recover while providing creditors with a better return than they might receive through liquidation.

In simple terms, a CVA is a debt repayment plan agreed with creditors, which allows the company to carry on trading and manage its debts in a structured way rather than shutting down immediately.