Company Voluntary Arrangements

Written by Douglas Pinteau on 14 March 2016

Many of our clients will have seen last week that beleaguered department store BHS is set to enter a CVA in a bid to slash its rent bill and save it from administration. As such, our insolvency and restructuring division, WSM Marks Bloom, provides an introductory look at the hot topic of CVAs.

What is a CVA?

A Company Voluntary Arrangement (“CVA”) is a formal insolvency procedure designed to rescue a viable company. It can be a powerful and flexible tool in restructuring a company’s liabilities, allowing repayment to creditors over a fixed period of time. Constituting a legally binding agreement between a company and its creditors, a CVA binds historic debt, freezes interest and protects against legal actions, so as to enable the company to continue to trade, whilst making manageable payments into a pot for division amongst bound creditors.

The process

A company via its directors, administrator or liquidator, will put proposals forward to its creditors to repay a certain sum, usually by way of monthly contributions over a fixed period – often between 3 and 5 years. Creditors will vote on the proposals with at least 75% of those creditors voting by value needing to agree to the proposals in order for the CVA to be effected. A licensed insolvency practitioner must administer the CVA as an independent arbiter, first as Nominee and then Supervisor of the arrangement. The role of Supervisor is to realise contributions, agree creditor claims, distribute funds when available and ensure that the terms of the arrangement are adhered to. The directors remain in control of the company and its assets.


  • Provides an element of ‘debt forgiveness’, where a certain amount of debt can be written-off
  • Legally binding agreement
  • All unsecured creditors bound, whether or not they vote in favour of the CVA
  • The company and its assets remain in control of the directors
  • Stops unilateral creditor enforcement
  • Constitutes a full and final settlement of the company’s bound liabilities
  • Allows the company to continue to trade without historic debt burden thereby improving cash flow
  • Allows the company to restructure –e.g. abandon unprofitable leases/contracts/employees
  • Tax losses can be offset against future earnings
  • Unlike administration there is no need to advertise that the company is “in a CVA” on company documents etc, reducing adverse publicity
  • Unlike administration or liquidation there is no requirement for a report on the director’s conduct to be submitted to the Department of Business Innovation & Skills

Should you wish to discuss any aspect of CVAs or other restructuring options, please contact one of our experts who will be happy to address any queries.