Company Voluntary Arrangement (CVA)

Historical debt, mounting tax arrears and supplier bills can bring an otherwise profitable business to its knees. Facing aggressive creditor action is overwhelming, but it doesn’t mean your company has to fold.

Pushing forward under unmanageable debt only builds operational pressure. Worse, making rushed choices under the threat of a winding-up petition risks your director duties and triggers personal guarantees. Taking a moment to evaluate your legal options allows you to halt enforcement and protect your trading position.

A Company Voluntary Arrangement (CVA) gives you a formal, statutory way to restructure liabilities while keeping your doors open. BCIA Recovery & Turnaround acts as your defensive buffer. Operating from Matlock and Manchester, our senior team brings 50 years of combined experience to handle your creditors, protect your personal standing and get your business back on solid ground.

What is a Company Voluntary Arrangement?

Understanding what a company voluntary arrangement is is key for directors seeking to avoid formal liquidation while preserving their trading entity. 

A Company Voluntary Arrangement (CVA) is a legally binding procedure under Part I of the Insolvency Act 1986 that allows an insolvent limited company to reach an agreement with its unsecured creditors to settle its outstanding debts over a fixed period.

The core CVA meaning centers on insolvency protection and debt restructuring: the company commits to paying an affordable monthly contribution – or a lump-sum distribution – from future trading profits over a three-to-five-year timeframe. 

During this period, unsecured creditors agree to freeze interest and charges, while agreeing to write off any remaining debt percentage once the proposal terms are successfully met. 

Crucially, the current board of directors retains full operational control over daily trading, working alongside a licensed insolvency practitioner who acts as the Supervisor overseeing the arrangement.

Will HMRC Accept a CVA?

A major concern for directors considering a company voluntary arrangement is whether Crown debt can be included, specifically asking: will HMRC accept a CVA?

HMRC is one of the most frequent creditors in UK corporate restructuring. While tax authorities hold secondary preferential status for certain taxes (such as VAT, PAYE and employee National Insurance Contributions), HMRC regularly votes in favor of CVAs provided the proposal is realistic, transparent, and viable.

To secure HMRC approval, a proposal must meet strict commercial criteria:

• Demonstrable future viability: Clear proof that the underlying business is commercially sound and capable of generating sufficient cash flow to cover both monthly CVA contributions and ongoing, current tax liabilities on time.
  
• Full compliance history: Up-to-date filing of all outstanding tax returns (VAT, Corporation Tax, PAYE) up to the date of the CVA proposal.
  
• Fair creditor return: Evidence that the repayment return offered through the CVA yields a better outcome for the Crown than an immediate liquidation.
  
• Honest disclosure: Total transparency regarding historical director drawings, asset valuations and inter-company accounts.

Working with BCIA Recovery & Turnaround ensures your CVA proposal is drafted to meet HMRC’s specific criteria, significantly increasing the likelihood of securing Crown approval.

Company Voluntary Arrangement Examples

Below are some hypothetical company voluntary arrangement examples that highlight how different commercial sectors may utilise this statutory tool to overcome sudden financial distress and return to profitability:

• Retail & hospitality (lease restructuring): A multi-site restaurant group facing unviable high-street rents uses a CVA to compromise lease liabilities, exit unprofitable sites and reduce monthly overheads while continuing to trade its core profitable locations.
  
• Manufacturing & engineering (historic debt restructuring): An established engineering firm hit by bad debt from a major client structures a 5-year CVA to pay 40p in the pound to trade suppliers, writing off the remaining 60% of historic debt while retaining its skilled workforce and machinery.
  
• Construction & contracting (HMRC arrears): A main contractor facing an unexpected Corporation Tax and VAT bill following a disputed contract uses a CVA to freeze HMRC enforcement and spread arrears over 48 affordable monthly instalments without interrupting live project delivery.

These examples demonstrate that a company voluntary arrangement acts as a flexible rescue framework tailored to the specific operational realities of your business.

Key Benefits of a CVA for Company Directors

Opting for a formal CVA offers significant advantages over informal payment arrangements or disorderly formal liquidation:

Benefit	How the CVA Protects Your Business
Director Control	The existing management team retains full operational control over daily trading without an administrator taking over.
Legal Moratorium	All legal action, bailiff visits, winding-up petitions, and County Court Judgments (CCJs) are legally frozen upon proposal filing.
Debt Write-Off	Any unsecured debt remaining at the conclusion of the agreed term (typically 3–5 years) is legally written off.
Improved Cash Flow	Multiple, unmanageable debt repayments are consolidated into a single, affordable monthly contribution tailored to your cash flow.
Reputational Protection	Unlike administration, trading contracts, customer relationships, and supply chains remain intact without brand disruption.

Is a CVA Right for Your Business?

While a company voluntary arrangement provides powerful insolvency protection, it is not suitable for every business. A CVA requires an underlying business model that is fundamentally profitable once historic liabilities are managed.

A CVA is likely the correct strategy if your business meets the following conditions:

• Predictable cash flow: You can generate reliable future income to cover current trading expenses while paying the agreed monthly CVA contribution.
  
• Viable core business: The financial difficulty stems from historic debts, bad debt hits, or temporary market shocks rather than a broken core product or service.
  
• Manageable overhead structure: You are able to cut unnecessary operational costs and adjust overheads to maintain future solvency.
  
• Director commitment: Management is fully committed to adhering to the strict reporting and payment schedules required by the Supervisor over the 3-to-5-year term.

If your company lacks future trading viability, alternative procedures such as a Creditors’ Voluntary Liquidation (CVL) or Pre-Pack Administration may be more appropriate. BCIA Recovery & Turnaround conducts an immediate, independent viability review to determine the right path for your situation.

The CVA Implementation Process

Executing a successful company voluntary arrangement requires careful preparation, robust financial modeling, and precise legal execution. BCIA guides you through a clear, four-stage process:

1	2	3	4
Financial Review & Proposal Drafting	Filing & Legal Protection	Creditor Decision Procedure	Ongoing Implementation & Debt Clearance
Financial Review & Proposal DraftingWe analyze your financial statements, build cash flow forecasts, and draft a realistic CVA proposal detailing repayment percentages and timelines.	Filing & Legal ProtectionThe proposal is filed in court, creating a legal buffer that halts active enforcement, winding-up threats, and HMRC action.	Creditor Decision ProcedureA formal voting process is conducted where at least 75% (by value) of voting unsecured creditors must approve the proposal.	Ongoing Implementation & Debt ClearanceOnce approved, you make your single monthly payment to the Nominee/Supervisor, who handles creditor distributions while you focus on running a profitable business.

Take Back Control of Your Business Today

A well-structured CVA gives your business the breathing space it needs to write off unmanageable debt and stay in control. We provide the practical, independent advice needed to build a proposal creditors will actually accept. Get in touch with our team today for a free, confidential chat.