The UK Rules
Company Voluntary Arrangements

Company Voluntary Arrangements UK

A limited company with debt problems might use a Company Voluntary Arrangement to recover from insolvency. Check how to apply for a CVA and how the process can be an alternative to liquidation.

What is a Company Voluntary Arrangement

In simple terms, a CVA is a legally binding statutory agreement used in business. The United Kingdom has been using these types of company agreements since 1986.

You might consider it as a rescue option. A CVA allows a limited company to continue trading while paying off its debt.

Thus, it would take place between an insolvent limited company and its creditors.

Company Voluntary Arrangements allow insolvent companies to repay their debts over several years. As a rule, the period of repayment will be a fixed term (often between one and five years).

Even so, the terms of any proposal would need approval from at least 75% of the creditors (by value of the debt). After getting the creditors' agreement, the company would be able to continue trading.

Note: As a sole trader (or self-employed), you would not use the Company Voluntary Arrangement process. You would be applying for Individual Voluntary Arrangements (IVA) instead.

How to Apply for a CVA in United Kingdom

All the directors or members must be in agreement before a company or limited liability partnership (LLP) can apply for a CVA. Other conditions of getting a Company Voluntary Arrangement include:

Note: You need an Insolvency Practitioner to get a CVA. You can search for a licensed Insolvency Practitioner (IP) online in your area. But, they charge for making a CVA application and for administering it.

Company Voluntary Arrangement Process

  1. After examining the company affairs, the Insolvency Practitioner will draft an 'arrangement'. It will cover the amount of debt the company can pay and the terms for a payment schedule. They would have to complete this within one (1) month of their appointment.
  2. They would then write to creditors with the details of the arrangement and invite them to cast a vote on it.
  3. Company Voluntary Agreements need approval from the creditors who are owed at least 75 percent of the debt.
  4. Failing to get 75% approval from the creditors means the business may face voluntary liquidation to pay off its debts.

As a rule, the company would not make the scheduled payments to the creditors. Instead, the payments would go through the Insolvency Practitioner until they get paid off in full.

Important InformationFailing to meet the agreed payment schedule means any of the creditors can apply to wind up a business.

Company Voluntary Arrangement Advantages

Company Voluntary Arrangement Disadvantages

What is a Company Voluntary Arrangement (CVA) in United Kingdom