A Company Voluntary Arrangement (CVA) is a formal, legally binding agreement between an insolvent or struggling limited company and its creditors to repay some or all of what is owed over an agreed period. The key feature is that the company carries on trading while the plan runs, rather than closing down. It is a company tool, not a personal one, so it sits with the business as a legal entity rather than with any director individually.
How a CVA works
A licensed insolvency practitioner draws up a proposal setting out how much the company can realistically pay and over what term, then puts it to the creditors. If creditors holding the required majority of the debt vote in favour, the arrangement binds them all, including those who voted against. The practitioner then supervises the plan, and the company makes its agreed contributions, usually monthly, until the term ends.
Why a company would use one
A CVA gives a fundamentally viable business breathing room to recover without being wound up. Trade continues, contracts and staff are often preserved, and creditors typically recover more than they would in a liquidation. It is one of several formal routes a company in difficulty can take, alongside administration, refinancing and informal time-to-pay deals. The wider menu of choices is set out in understanding business insolvency options.
How a CVA differs from related terms
A CVA is easy to confuse with similar-sounding arrangements, so the distinctions matter:
- An IVA is the personal equivalent, for an individual rather than a company.
- A company in insolvency may use a CVA as a rescue route, but insolvency itself is the underlying financial state, not the plan.
- Restructuring is the broader idea of reshaping a company's finances or operations; a CVA is one formal mechanism for doing that.
- A liquidation closes the company down, whereas a CVA is specifically designed to keep it trading.
What a CVA means for borrowing
A live CVA is a serious signal to any lender, but with Credicorp it is not an automatic refusal. We look at whether the company is meeting the plan as agreed, how far through the term it is, and whether new finance would genuinely help rather than stretch the business past the point the arrangement was meant to fix. Many CVAs also restrict taking on new credit, and some require the supervisor's consent first, so it is worth checking your own terms before you apply. The full picture is in can a company in a CVA apply.
Protection while a plan runs
If your company is in difficulty, the statutory Breathing Space scheme will not usually cover a corporate loan, because that scheme is built for personal debt. That does not leave you without support, though, and whether Breathing Space applies to a business loan explains the protection a company borrower does have. As ever, speak to a licensed insolvency practitioner early, and tell us about the position so we can find the right path.
Credicorp is an exempt business lender to UK limited companies and LLPs only, not to sole traders or individuals, and we are a lender rather than a broker. The borrower is the company, with no personal guarantees from directors. Because this is business lending outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS. For more plain-English definitions, browse the Credicorp glossary.
See also: What is a SIC code?, A plain-English glossary of business-lending terms, What are accounts receivable?.