BUSINESS DEBT & INSOLVENCY

Company Voluntary Arrangements (CVA)

A Company Voluntary Arrangement is a formal insolvency procedure that can allow a financially distressed company to reach an agreement with its creditors and continue trading.

01 Company Continues Trading
02 Creditors Vote on the Proposal
03 Directors Retain Control
Understand How a CVA Works → Get Support
Corporate boardroom representing company restructuring and recovery
COMPANY RESTRUCTURING RESTRUCTURE THE DEBT. KEEP TRADING.
THE KEY QUESTION Does the underlying business have a viable future?
CVA COMPANY VOLUNTARY
ARRANGEMENT
A FORMAL INSOLVENCY PROCEDURE Designed to restructure company debt where continued trading is viable.
01 Formal Insolvency Procedure
02 Insolvency Practitioner Required
03 Creditor Approval Required
UNDERSTANDING A CVA

What Is a Company Voluntary Arrangement?

DIRECT ANSWER

A Company Voluntary Arrangement (CVA) is a formal insolvency procedure that allows a company to propose an arrangement with its creditors for dealing with its debts. If approved, the company can continue trading while the arrangement is supervised by an insolvency practitioner.

THE CORE DISTINCTION
A CVA restructures the company's debt position. It does not, by itself, close the company.
THE BASIC CVA JOURNEY

At its simplest, a CVA creates a formal route between financial distress and a structured creditor arrangement.

01
FINANCIAL PRESSURE Company in Financial Difficulty

The company is struggling to meet debts or historic liabilities as they fall due.

→
02
FORMAL PROPOSAL CVA Proposal

A proposal is prepared setting out how the company's creditors would be dealt with.

→
03
CREDITOR DECISION Creditors Consider the Proposal

Creditors receive the proposal and have the opportunity to vote on the arrangement.

→
04
IF APPROVED Company Continues Trading

The company operates subject to the approved arrangement and its ongoing obligations.

AN IMPORTANT DIFFERENCE

A CVA Is Not Liquidation.

Both sit within the insolvency landscape, but their purpose and effect are fundamentally different.

CVA RESTRUCTURE
The company can continue.
Company remains in existence
Trading can continue
Directors generally remain in control
Arrangement supervised by an insolvency practitioner
≠
LIQUIDATION WIND DOWN
The company is brought to an end.
Liquidator takes control
Company assets are dealt with
Affairs are wound up
Company ultimately moves towards dissolution
IP
INSOLVENCY PRACTITIONER REQUIRED

A CVA is a formal insolvency procedure — not an informal payment plan.

A company cannot simply declare itself to be in a CVA. The formal process involves a licensed insolvency practitioner, who performs the relevant statutory role in relation to the proposal and, if approved, the supervision of the arrangement.

WIDER BUSINESS DEBT POSITION A CVA is one potential route within the wider corporate insolvency landscape.
Explore Business Debt & Insolvency →
VIABILITY & FINANCIAL PRESSURE

When Might a CVA Be Considered?

A CVA may be considered where a company is insolvent or experiencing serious financial difficulty, but there is still a viable underlying business capable of continuing if its debt position can be successfully restructured.

Financial pressure alone does not mean that a CVA is appropriate. The company's future ability to trade and meet its ongoing obligations matters.

THE CENTRAL QUESTION
Is there a viable business underneath the debt?

A CVA is intended to provide a restructuring route for a business that has a realistic prospect of continuing — not simply to postpone an unavoidable closure.

CURRENT POSITION

Financial Pressure

01

A company considering restructuring may already be facing significant pressure from historic liabilities, creditors or deteriorating cash flow.

01 HMRC Arrears

VAT, PAYE, Corporation Tax or other tax liabilities may have accumulated.

02 Supplier Arrears

Important suppliers may be waiting for overdue invoices to be paid.

03 Historic Debt

Older liabilities may be consuming cash needed for current trading.

04 Cash-Flow Pressure

The timing of receipts and payments may no longer support the company's obligations.

05 Creditor Demands

Collection activity or formal creditor pressure may be increasing.

06 Other Company Liabilities

Finance, property, contractual or other liabilities may also contribute to the position.

+
FUTURE POSITION

Viable Underlying Business

02

The other side of the assessment is whether the company has a credible future if the historic debt burden can be addressed.

01 Sustainable Trading

The underlying business needs a realistic prospect of continuing to operate.

02 Credible Cash Flow

Forecast income and expenditure need to support the proposed restructuring.

03 Ongoing Liabilities

New obligations arising during continued trading need to be met as they fall due.

04 CVA Contributions

The company needs the financial capacity to comply with the arrangement being proposed.

05 Operational Recovery

The causes of financial distress need to be understood and capable of being addressed.

06 Realistic Restructuring

The proposal must be based on achievable assumptions rather than optimistic projections.

FINANCIAL PRESSURE Historic debt and creditor pressure
+
BUSINESS VIABILITY Credible future trading
=
POTENTIAL RESTRUCTURING CONTEXT CVA may warrant professional assessment
LOOK BEYOND TODAY

Two Different Questions Need Answering.

TODAY Can the company meet its debts as they fall due?

Difficulty paying debts on time can be one indicator that the company is insolvent and requires prompt attention.

TOMORROW Could the underlying business survive if the debt position were restructured?

The future trading model, cash flow and ability to meet ongoing obligations are central to whether a rescue strategy is realistic.

!
NOT A DIY ELIGIBILITY TEST

Having debt does not automatically make a company suitable for a CVA.

The company's assets, liabilities, cash flow, creditor position, causes of distress and future viability need to be considered together. Directors should seek advice from an insolvency practitioner when assessing whether a CVA or another insolvency route is appropriate.

BUSINESS FINANCIAL DIFFICULTY The earlier the complete position is understood, the more clearly the available routes can be assessed.
Understand Business Debt & Insolvency →
THE CVA PROCESS

How Does a Company Voluntary Arrangement Work?

A CVA is a structured insolvency process. The company's financial position is reviewed, a proposal is prepared with the involvement of an insolvency practitioner, and creditors are asked to vote on whether the arrangement should be approved.

If the required approvals are obtained, the arrangement takes effect and the company must comply with its agreed terms.

FROM FINANCIAL DISTRESS TO A FORMAL PROPOSAL
A CVA is not created by simply agreeing monthly payments with creditors.

It is a formal procedure involving financial review, a proposal to creditors, creditor decision-making and, if approved, ongoing supervision of the arrangement.

THE JOURNEY

The precise circumstances of each company will differ, but the process can broadly be understood through the following stages.

01
UNDERSTAND THE POSITION

Review the Company

The company's financial position needs to be understood, including its debts, assets, creditors, cash flow, current trading position and prospects for continued operation.

Assets Liabilities Cash Flow Creditors Viability
02
PROFESSIONAL INVOLVEMENT

Involve an Insolvency Practitioner

A CVA is a formal insolvency procedure and requires the involvement of an insolvency practitioner. The practitioner considers the company's position and the proposed arrangement through the relevant statutory process.

A CVA cannot simply be created internally by the company.
03
BUILD THE ARRANGEMENT

Prepare the CVA Proposal

A formal proposal is prepared explaining how the company intends to deal with its creditors and why the proposed arrangement is considered capable of being implemented.

01 Financial Position
02 Proposed Terms
03 Future Cash Flow
04 Creditor Outcome
04
CREDITOR DECISION

Creditors Consider the Proposal

The proposal is put before creditors through the formal decision procedure. Creditors can consider the terms and decide whether to support the proposed arrangement.

PROPOSAL
→
CREDITOR REVIEW
→
VOTE
05
REQUIRED APPROVAL

The Creditor Vote Is Assessed

The proposal needs the required level of creditor approval before it can take effect. The voting rules are more detailed than simply counting the number of creditors that vote yes or no.

KEY VOTING THRESHOLD 75%

At least 75% by value of creditors voting must approve the proposal, subject to the applicable voting rules.

06
IF APPROVED

The CVA Takes Effect

Once the necessary approvals have been obtained, the CVA takes effect in accordance with the statutory process and the terms of the approved arrangement.

COMPANY Continues
DIRECTORS Remain in Control
CVA Takes Effect
07
THE ARRANGEMENT IN PRACTICE

Supervision & Compliance

The approved CVA is supervised by the insolvency practitioner. The company must comply with the agreed terms while continuing to manage its ongoing trading obligations.

AGREED TERMS
→
COMPANY COMPLIES
→
IP SUPERVISION
→
CVA PROGRESSES
THE PURPOSE OF THE PROCESS

From Unstructured Pressure to a Formal Arrangement.

The CVA process is designed to replace an unmanaged historic debt position with an approved arrangement, while the company continues operating where that remains viable.

BEFORE Financial Distress
  • Historic arrears
  • Multiple creditors
  • Cash-flow pressure
  • Escalating demands
→ CVA PROCESS
IF APPROVED Formal Arrangement
  • Defined terms
  • Creditor approval
  • IP supervision
  • Continued trading
!
APPROVAL IS NOT THE FINISHING LINE

The company must be able to sustain the CVA after creditors approve it.

A workable proposal needs to account for both the arrangement itself and the company's continuing obligations. Future taxes, wages, suppliers and other trading costs still need to be managed while the CVA is in place.

CREDITOR APPROVAL

What Percentage of Creditors Must Approve a CVA?

DIRECT ANSWER

For a CVA proposal to be approved, at least 75% by value of the creditors participating in the decision procedure must vote in favour, subject to an additional safeguard involving creditors who are unconnected with the company.

AT LEAST 75% BY VALUE
THE PRIMARY VOTING THRESHOLD

It is the value of the votes — not simply the number of creditors.

Creditors do not each carry an equal percentage simply because they have one vote. Their voting influence is determined by the value of the claim admitted for voting.

IMPORTANT DISTINCTION
NOT THIS “75% of every creditor must agree.”
×
THE VOTING TEST At least 75% by value of those voting.
✓
SIMPLE ILLUSTRATION

Why Debt Value Matters.

The following example is purely illustrative, but shows why counting creditors alone does not tell you whether the required voting threshold has been reached.

CREDITOR VOTING CLAIM VOTE
Creditor A £50,000 YES
Creditor B £30,000 YES
Creditor C £20,000 NO
TOTAL VOTING VALUE £100,000
VALUE VOTING YES £80,000
SUPPORT 80%

Illustration only. Actual CVA voting is subject to the statutory voting rules and the treatment and admission of creditor claims.

SECOND TEST
UNCONNECTED CREDITOR SAFEGUARD

The 75% threshold is not the only voting rule.

Even where the primary 75% threshold is achieved, the proposal will not be approved if more than half in value of the unconnected creditors voting vote against it.

UNCONNECTED CREDITORS More than 50% BY VALUE VOTING AGAINST
→
RESULT Proposal Not Approved
WHY THE SECOND TEST EXISTS

Connected and Unconnected Creditors Matter.

The additional voting safeguard limits the ability of creditors connected with the company to determine the outcome against the wishes of independent creditors.

CONNECTED A relationship with the company may affect the voting calculation.

Whether a creditor is legally connected with the company is determined under the applicable insolvency rules and legislation.

UNCONNECTED Independent creditor votes receive additional protection.

Their voting position is relevant to the separate safeguard applied when the CVA decision is calculated.

WHAT IF A CREDITOR VOTES NO?

A Dissenting Vote Does Not Necessarily Stop the CVA.

01 Creditor Reviews the Proposal
→
02 Creditor Votes Against
→
03 Required Overall Approval Is Reached
→
04 CVA Can Still Take Effect

Once approved, a CVA can bind creditors within its statutory scope even where an individual creditor voted against the proposal. The position of particular creditor classes and rights can be more complex and should be considered within the formal insolvency process.

§
NOT EVERY CREDITOR RIGHT CAN SIMPLY BE ALTERED

Secured and preferential creditor rights require particular consideration.

A CVA cannot, without the required consent, simply remove the rights of a secured creditor to enforce its security or alter the priority rights of a preferential creditor. The exact creditor position therefore needs to be considered when a proposal is structured.

THE KEY POINT A CVA is a creditor-approved restructuring — not a decision the company can impose on its own.
HMRC & COMPANY TAX DEBT

Can HMRC Debt Be Included in a CVA?

DIRECT ANSWER

HMRC can be a creditor in a Company Voluntary Arrangement and may vote on the proposal. Its position can be particularly important where tax arrears represent a substantial proportion of the company's creditor balance.

HMRC considers CVA proposals on their individual circumstances and does not automatically support an arrangement simply because one has been proposed.

HMRC CREDITOR POSITION
AN IMPORTANT CREDITOR

HMRC does not automatically support a CVA.

HMRC's published approach is to consider whether there is a realistic prospect that the proposed arrangement can be implemented successfully. The credibility of the company's future position therefore matters as well as the amount already owed.

COMPANY TAX PRESSURE

HMRC Arrears Can Build Across Different Taxes.

A company experiencing financial difficulty may have more than one type of outstanding tax liability. The complete HMRC position needs to be understood when the company's finances are reviewed.

VAT Value Added Tax

Outstanding VAT liabilities can form part of the company's wider HMRC creditor position.

PAYE Payroll Liabilities

PAYE and associated payroll tax liabilities may have accumulated during cash-flow pressure.

CT Corporation Tax

Corporation Tax owed by the company may also need to be considered within its tax position.

OTHER HMRC Liabilities

The precise tax position will depend on the company's circumstances and liabilities.

WHEN CONSIDERING A PROPOSAL

HMRC Will Look Beyond the Historic Debt.

A restructuring proposal needs to demonstrate more than the existence of arrears. The future ability of the company to operate and comply with its obligations is highly relevant.

01
BUSINESS Future Viability

Is there a realistic prospect that the company can continue trading successfully?

02
FINANCIAL Cash-Flow Forecasts

Are the forecasts supporting the proposal credible and capable of being achieved?

03
TAX Future Tax Compliance

Can the company meet its ongoing tax obligations while the arrangement is running?

04
HISTORY Compliance History

The company's previous dealings and compliance position may be relevant when HMRC assesses the proposal.

05
PROPOSAL Credibility of the Terms

The proposed arrangement needs to be based on realistic assumptions and sustainable commitments.

06
OUTCOME Creditor Position

The proposal and expected outcome are considered within the wider circumstances of the company.

A CRITICAL DISTINCTION

Historic Tax Debt and Future Tax Are Different Issues.

Restructuring existing liabilities does not mean the company can allow new liabilities to accumulate after the arrangement begins.

EXISTING POSITION Historic HMRC Arrears

Existing liabilities are considered as part of the company's creditor and restructuring position.

VAT arrears
PAYE arrears
Corporation Tax
≠
CONTINUED TRADING New Tax Liabilities

Taxes arising from continued trading need to be dealt with as part of the company's ongoing financial obligations.

Current VAT
Current PAYE
Future tax obligations
WHY HMRC'S POSITION CAN MATTER

Creditor Voting Is Based on Value.

As explained in the creditor voting section, the primary CVA approval threshold is calculated by reference to the value of creditors participating in the decision procedure.

If HMRC represents a significant proportion of the voting debt, its vote may therefore have a substantial effect on whether the required approval threshold is reached.

EXAMPLE STRUCTURE £300,000 TOTAL ILLUSTRATIVE VOTING DEBT
HMRC £150,000
SUPPLIERS £100,000
OTHER CREDITORS £50,000

Illustrative figures only. Actual voting entitlement depends on the claims admitted for voting and the applicable insolvency rules.

!
HMRC SUPPORT SHOULD NOT BE ASSUMED

A proposal needs to be credible, sustainable and capable of implementation.

HMRC considers proposals on their individual facts. A company should not assume that tax arrears will simply be restructured or that HMRC will vote in favour. The company's complete position and the terms of the proposed CVA require professional assessment.

THE BIGGER PICTURE A viable CVA needs to address yesterday's debt without creating tomorrow's arrears.

Continued trading needs to generate enough cash to support both the agreed restructuring and the company's ongoing obligations.

DIRECTORS & CONTROL

Do Directors Remain in Control During a CVA?

DIRECT ANSWER Generally, yes.

A defining feature of a Company Voluntary Arrangement is that the directors normally retain control of the company while it continues trading and complies with the approved arrangement.

DIRECTOR CONTROL YES.
ONE OF THE KEY DISTINCTIONS

The company remains under director management.

Unlike liquidation or administration, entering a CVA does not itself transfer day-to-day control of the company to an insolvency office-holder. Directors continue managing the business while the CVA is supervised by an insolvency practitioner.

WHAT THIS MEANS IN PRACTICE

Directors Continue Running the Business.

01 Business Operations

Directors continue to manage the company's ordinary business operations while the company trades.

02 Commercial Decisions

Management remains responsible for the commercial decisions required to operate the company.

03 Employees & Customers

The company can continue its relationships with employees and customers as part of ongoing trading.

04 Future Trading

Directors remain responsible for ensuring continued trading is managed appropriately alongside the CVA.

CONTROL OF THE COMPANY

CVA vs Liquidation

The difference in who controls the company is one of the clearest distinctions between restructuring through a CVA and placing an insolvent company into liquidation.

RESTRUCTURE CVA COMPANY VOLUNTARY ARRANGEMENT
CONTROL Directors
  • 01

    Company can continue trading

  • 02

    Directors retain control

  • 03

    Business remains under director management

  • 04

    CVA supervised by an insolvency practitioner

CONTROL ≠ SAME COMPANY
DIFFERENT PROCEDURE
WIND DOWN LIQUIDATION INSOLVENT LIQUIDATION
CONTROL Liquidator
  • 01

    Liquidator takes control

  • 02

    Directors no longer control company assets

  • 03

    Directors cannot act for the company as before

  • 04

    Liquidator deals with the company's affairs

CONTROL COMES WITH RESPONSIBILITY

Remaining in Control Does Not Remove a Director's Responsibilities.

A CVA changes how certain company debts are dealt with. It does not remove the responsibilities that come with continuing to act as a company director.

01
Continue Managing the Company

Directors remain responsible for the company's management while it continues trading.

02
Meet Ongoing Obligations

Continued trading needs to account for wages, taxes, suppliers and other new liabilities as they arise.

03
Comply With the CVA

The company must comply with the terms and obligations contained within the approved arrangement.

04
Respond if Circumstances Change

If the company's financial position deteriorates, directors should not assume that the existence of a CVA resolves every insolvency concern.

TWO DIFFERENT ROLES

Director Management. Insolvency Practitioner Supervision.

DIRECTORS Run the Company

Directors continue managing the company's business and ongoing trading.

CVA
INSOLVENCY PRACTITIONER Supervises the Arrangement

The insolvency practitioner administers and supervises the CVA in accordance with its terms and the formal process.

A
WHAT ABOUT ADMINISTRATION?

Administration is different again.

During administration, the administrator has control of the business. A CVA therefore differs from both administration and liquidation because the directors ordinarily remain in control while the company continues trading.

CVA Director Control
≠
ADMINISTRATION Administrator Control
!
IMPORTANT

A CVA is not a shield from directors' responsibilities.

Directors should continue to monitor the company's financial position carefully. If the company is insolvent or its position changes materially, professional insolvency advice should be obtained so that the directors understand the duties and options relevant to the circumstances.

THE KEY DISTINCTION A CVA can restructure company debt while allowing the directors to remain at the helm — but control and responsibility remain connected.
CONTINUED TRADING

Can a Company Continue Trading During a CVA?

DIRECT ANSWER Yes — that is one of the central purposes of a CVA.

A Company Voluntary Arrangement can allow a viable but insolvent company to continue trading while dealing with creditor liabilities under the terms of an approved arrangement.

THE BUSINESS DOES NOT AUTOMATICALLY CLOSE

Trading Can Continue.

Unlike liquidation, a CVA is designed around the continuation of the company. The company remains in existence, directors remain in control and the underlying business can continue operating while the arrangement is in place.

COMPANY Continues TO EXIST
+
DIRECTORS Remain IN CONTROL
+
BUSINESS Continues TO TRADE
DAY-TO-DAY BUSINESS

What Happens to Employees, Suppliers and Customers?

Continuing to trade means the company still has commercial relationships to manage. A CVA deals with the company's restructuring position, but day-to-day business does not simply stop.

EMPLOYEES 01

The Workforce Can Continue

Where the business continues operating, the company can continue employing staff. The workforce may remain an important part of the company's ability to trade and recover.

Employment issues arising from any restructuring need to be considered on their own facts.
SUPPLIERS 02

Supply Relationships Still Matter

A trading company may still depend on suppliers for stock, materials, services or other essential inputs. Maintaining workable commercial relationships can therefore be critical.

Historic amounts owed and new supplies should not automatically be treated as the same liability.
CUSTOMERS & CONTRACTS 03

Existing Business Can Continue

The company can continue servicing customers, winning work and generating revenue while trading through the arrangement.

Individual contracts may contain terms affected by insolvency or restructuring and should be reviewed where relevant.
THE CRITICAL DISTINCTION

Historic Debt vs New Trading Liabilities.

A company continuing through a CVA needs to distinguish between liabilities addressed by the restructuring and costs generated as the business continues trading.

BEFORE / EXISTING POSITION
HISTORIC Creditor Liabilities

Liabilities existing within the relevant restructuring position may be dealt with under the terms of the approved CVA, depending on the nature of the claim and the arrangement.

  • Existing supplier balances
  • Historic tax liabilities
  • Existing unsecured creditor claims
  • Other liabilities within the arrangement
≠
AFTER / CONTINUED TRADING
NEW Trading Liabilities

Continued trading creates new costs and obligations. These need to be managed as part of the company's ongoing business rather than treated as though every new liability is absorbed into the CVA.

  • New supplier purchases
  • Current payroll costs
  • Ongoing tax obligations
  • Current operating expenses
CONTINUED TRADING REQUIRES CASH FLOW

The Business Still Has to Fund Its Future.

Restructuring historic debt does not remove the financial demands of operating a company. The underlying business needs sufficient cash flow to support continued trading and the commitments required by the arrangement.

REVENUE Money Into the Business
→
OPERATIONS Ongoing Trading Costs
→
CVA Agreed Commitments
→
OBJECTIVE Sustainable Trading
!
A CVA IS NOT PERMISSION TO ACCUMULATE NEW DEBT

Continued trading needs to remain sustainable.

The purpose of restructuring historic liabilities is not to create space for further unaffordable debt. Directors need to continue monitoring cash flow, ongoing liabilities and the company's ability to meet the commitments arising from future trading.

SUPPLIER RELATIONSHIPS

The Legal Position and the Commercial Position Are Not Always the Same Thing.

A CVA can establish how relevant creditor claims are dealt with under the arrangement. But a supplier deciding whether to continue supplying the company is also making a commercial decision.

Continued access to stock, materials, credit terms or essential services may therefore depend on the individual supplier relationship and applicable contractual terms.

EXISTING DEBT Creditor Position CONSIDERED WITHIN THE RESTRUCTURING
SUPPLIER
FUTURE BUSINESS Commercial Relationship TERMS FOR CONTINUED SUPPLY
§
CONTRACTS NEED INDIVIDUAL CONSIDERATION

Do not assume every contract continues on exactly the same terms.

The company can continue trading during a CVA, but the effect of financial distress or a formal restructuring process on a particular lease, finance agreement, supply agreement, licence or commercial contract depends on the relevant terms and legal circumstances.

WHY VIABILITY MATTERS

A CVA Needs a Business Worth Continuing.

01 Can the business generate sustainable revenue?
02 Can ongoing operating costs be met?
03 Can new liabilities be kept under control?
04 Can the company meet its CVA commitments?
THE KEY PRINCIPLE A CVA can deal with financial pressure from the past — but the company still has to make the future work.

Continued trading depends on a viable underlying business, realistic cash flow and the ability to manage both the arrangement and the company's ongoing obligations.

DIRECTOR EXPOSURE

Does a CVA Protect a Director's Personal Guarantee?

DIRECT ANSWER Not automatically.

A CVA deals with the company's liabilities. A personal guarantee is a separate legal commitment given by an individual and needs to be considered independently.

THE COMPANY CVA
COMPANY LIABILITY

The Company's Debt Position

A Company Voluntary Arrangement establishes how relevant company creditor claims are dealt with under the approved restructuring proposal.

Liability sits with the limited company.

≠ SEPARATE
OBLIGATIONS
THE INDIVIDUAL PG
PERSONAL LIABILITY

The Director's Guarantee

Where a director has personally guaranteed a company debt, the guarantee creates a separate potential liability for that individual if the company does not meet the guaranteed obligation.

Liability may sit with the individual guarantor.

THE IMPORTANT POINT COMPANY
≠
PERSONAL GUARANTOR DIRECTOR

Limited company liability and liability created under a personal guarantee are not the same thing.

WHERE PERSONAL EXPOSURE CAN ARISE

Which Company Debts Might Be Guaranteed?

Personal guarantees are commonly requested where a creditor wants additional security beyond the limited company itself. Whether a particular debt is guaranteed depends on the agreements actually entered into.

01
Business Loans

A lender may have required one or more directors to personally guarantee borrowing provided to the company.

02
Overdrafts & Finance

Banking or other finance facilities may contain personal guarantee obligations depending on the facility terms.

03
Supplier Credit

Some suppliers request a personal guarantee before extending significant credit to a limited company.

04
Property & Other Agreements

Guarantees can also arise in connection with leases or other commercial agreements, depending on the contractual terms.

BEFORE ASSUMING YOU ARE PROTECTED

Establish Exactly What Was Guaranteed.

The existence and extent of personal exposure should be established from the actual guarantee and surrounding documentation rather than assumed from the company's CVA position.

01 Which Debt?

Identify the specific company facility, agreement or liability connected to the guarantee.

02 Who Gave It?

Establish which director, shareholder or other individual actually entered into the guarantee.

03 What Is the Scope?

The wording may determine whether liability is limited, unlimited, secured or otherwise subject to particular terms.

04 Has a Demand Been Made?

Check whether the creditor has already issued a demand or correspondence seeking payment from the guarantor personally.

DOCUMENTS MATTER

Start With the Actual Guarantee.

A director should not assume the extent of a personal guarantee from memory or from the amount currently owed by the company. The signed documentation and relevant creditor correspondence are important to understanding the position.

01 Locate GUARANTEE & FACILITY DOCUMENTS
→
02 Identify DEBT & GUARANTOR
→
03 Review TERMS & CURRENT POSITION
→
04 Understand POTENTIAL PERSONAL EXPOSURE
!
DO NOT ASSUME THE CVA REMOVES THE GUARANTEE

Restructuring the company does not automatically restructure the director personally.

A CVA and a personal guarantee involve different legal relationships. The company's restructuring position therefore needs to be considered separately from any personal obligation created by the guarantee.

WHY THIS MATTERS TO DIRECTORS

A Personal Guarantee Can Move the Problem Beyond the Company.

Limited liability ordinarily separates company debts from the director personally. A personal guarantee is important because it can create personal exposure where the guaranteed company obligation is not met.

Depending on the guarantee, the debt and the circumstances, a creditor may seek recovery from the guarantor personally.

LIMITED COMPANY Company Debt
PERSONAL GUARANTEE →
INDIVIDUAL Personal Exposure SUBJECT TO THE TERMS AND CIRCUMSTANCES OF THE GUARANTEE
PG
RELATED DIRECTOR GUIDANCE

Concerned About a Personal Guarantee?

Our Personal Guarantees page explains how guarantees work, why directors may become personally exposed, what to look for in the documentation and what can happen when a creditor seeks payment.

Explore Personal Guarantees →
INDIVIDUAL CIRCUMSTANCES MATTER The wording of the guarantee matters.

Questions about validity, enforceability, scope, security, demands or a director's personal legal position may require review by an appropriately qualified professional. A CVA should not be treated as evidence that a separate personal guarantee has been released or resolved.

THE KEY PRINCIPLE A CVA restructures the company's position. A personal guarantee can leave a separate question for the director.
WHEN THE ARRANGEMENT COMES UNDER PRESSURE

What Happens if a CVA Fails?

DIRECT ANSWER The outcome depends on what has gone wrong and whether the company can still be rescued.

If a company cannot comply with its CVA, the arrangement may ultimately fail or terminate. The company's financial position then needs to be reassessed and further insolvency action may become necessary.

CVA
APPROVAL IS ONLY THE BEGINNING

A CVA Needs to Be Sustainable — Not Simply Approved.

Creditor approval puts the arrangement in place, but the company still needs to trade successfully, meet the agreed terms and keep its ongoing financial obligations under control.

HOW PRESSURE CAN DEVELOP

From an Approved CVA to an Arrangement at Risk.

The exact consequences depend on the terms of the CVA and the circumstances of the company, but a deterioration can broadly follow this pattern.

01
CVA IN PLACE The Arrangement Begins

The company continues trading and must comply with the terms of the approved arrangement.

↓
02
FINANCIAL PRESSURE Performance Falls Behind

Cash-flow problems, weaker trading or other financial pressure may make it difficult to comply with the CVA.

↓
03
BREACH / NON-COMPLIANCE The CVA Comes Under Pressure

Missed payments or another failure to comply with the agreed terms may trigger consequences under the arrangement.

↓
04
CVA AT RISK The Position Must Be Reassessed

Whether the problem can be addressed will depend on the CVA terms, the company's circumstances and whether the underlying business remains viable.

↓
05
FAILURE / TERMINATION Further Action May Be Required

If the CVA cannot continue, the company may need another restructuring approach, administration or liquidation depending on its financial position.

WHY PROBLEMS CAN DEVELOP

What Can Put a CVA Under Pressure?

A CVA is built around assumptions about the company's ability to continue trading and meet the arrangement. If those assumptions no longer hold, the restructuring can become difficult to sustain.

01 Missed CVA Payments

The company may become unable to maintain the payment schedule required by the arrangement.

02 Weaker Trading

Revenue or margins may fall below the assumptions used when the proposal was prepared.

03 Cash-Flow Problems

The business may struggle to fund both ordinary trading costs and its CVA commitments.

04 New Liabilities

New tax, supplier or operating liabilities can create additional pressure if they cannot be paid as they fall due.

!
MISSED PAYMENTS MATTER

What if the Company Cannot Meet the Agreed Payment Schedule?

GOV.UK states that if a company does not meet the agreed CVA payment schedule, creditors can apply to wind up the business.

That does not mean every missed payment instantly results in liquidation. The specific CVA terms, the nature of the default and the company's wider financial position all need to be considered.

IF THE CVA CANNOT CONTINUE

What Could Happen Next?

CVA failure does not create one automatic outcome. The next step depends on whether there is still a viable business, the company's assets and liabilities, creditor pressure and the options legally available.

CVA Arrangement Cannot Continue
ROUTE 01
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Further Restructuring

If the underlying business remains viable, there may be circumstances in which a revised restructuring approach can be considered.

DEPENDS ON THE COMPANY'S CURRENT POSITION
ROUTE 02
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Company Administration

Administration may be considered in some circumstances where formal protection and an administrator-led process are appropriate.

ADMINISTRATOR TAKES CONTROL
ROUTE 03
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Company Liquidation

Where the company cannot continue, liquidation may become the appropriate formal insolvency route for closing the company and dealing with its assets.

BUSINESS GENERALLY CLOSES
DIFFERENT PROCEDURES — DIFFERENT PURPOSES

Failure Does Not Mean Every Company Follows the Same Route.

The company's position needs to be considered as it exists at that point. A business that still has a viable future may present a very different situation from one that can no longer continue trading.

ADMINISTRATION Formal Protection & Administrator Control

An insolvency practitioner is appointed as administrator and takes control while pursuing the statutory purpose of the administration.

LIQUIDATION Closure & Asset Realisation

Where the company cannot continue, liquidation involves closing the company and dealing with its assets for creditors through the formal insolvency process.

CREDITOR PRESSURE CAN RETURN

A Failed CVA Can Expose the Company to Further Creditor Action.

One of the risks of an unsustainable CVA is that the company may still be insolvent after the arrangement breaks down. Creditors may then have routes available to pursue unpaid debts, including applying to wind up the company where the legal requirements are met.

CVA Fails
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DEBT Remains
→
PRESSURE Returns
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ACTION May Follow
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DIRECTORS STILL HAVE RESPONSIBILITIES

Financial deterioration should not simply be ignored.

If the company is insolvent or its position is deteriorating, directors need to remain conscious of their duties and the interests of creditors. Professional insolvency advice may be needed to understand the company's position and the formal options available.

DO NOT WAIT FOR COMPLETE FAILURE

Warning Signs Should Be Addressed Early.

CVA payments becoming difficult
New HMRC arrears developing
Suppliers going unpaid
Payroll pressure increasing
Cash-flow forecasts deteriorating
Creditor action escalating
THE KEY PRINCIPLE A CVA should provide a realistic route towards a sustainable company.

If the arrangement itself becomes unsustainable, the focus needs to return to the company's current financial position, its viability and which formal options remain available.

UNDERSTANDING THE DIFFERENT ROUTES

How Is a CVA Different From CVL or Administration?

THE CENTRAL DIFFERENCE

These are different formal insolvency procedures designed for different circumstances. The right direction depends on the company's financial position, viability and what needs to happen next.

COMPANY VOLUNTARY ARRANGEMENT CVA
RESTRUCTURE

Restructure the Debt. Continue the Company.

A CVA can allow a viable but insolvent company to reach a formal arrangement with creditors and continue trading while directors retain control of the business.

Company can continue trading

Directors normally retain control

Creditors vote on the proposal

Insolvency practitioner required

DIRECTION CONTINUATION
CREDITORS' VOLUNTARY LIQUIDATION CVL
CLOSE

Close the Company. Deal With Its Affairs.

A CVL is used where an insolvent company is being closed down voluntarily. An authorised insolvency practitioner is appointed as liquidator to take control of the liquidation.

Company is wound down

Liquidator takes control

Company assets are realised

Company ultimately closes

DIRECTION CLOSURE
COMPANY ADMINISTRATION ADMIN
PROTECT

Formal Protection. Administrator Control.

In administration, an insolvency practitioner becomes administrator and takes control of the company while pursuing the statutory purpose of the administration.

Administrator takes control

Creditor action is restricted

Business may continue while options are pursued

Several different outcomes are possible

DIRECTION PROTECTION / RESTRUCTURING
THE IMPORTANT QUESTION WHAT NEEDS TO HAPPEN TO THE COMPANY?

The procedure should follow the company's actual circumstances. A business that remains viable but needs debt restructuring presents a different situation from one that needs protection while a rescue or sale is pursued, or one that can no longer continue.

AT A GLANCE

Three Procedures. Three Different Directions.

This is a high-level comparison only. Formal insolvency procedures involve legal, financial and commercial considerations that depend on the individual company.

PROCEDURE
CVA
CVL
ADMINISTRATION
PRIMARY DIRECTION
Restructure DEAL WITH DEBT WHILE SEEKING CONTINUATION
Close WIND DOWN THE INSOLVENT COMPANY
Protect PURSUE THE PURPOSE OF ADMINISTRATION
WHO CONTROLS?
Directors GENERALLY REMAIN IN CONTROL
Liquidator TAKES CONTROL OF THE LIQUIDATION
Administrator TAKES CONTROL OF THE COMPANY
TRADING POSITION
May Continue WHERE THE BUSINESS REMAINS VIABLE
Wound Down LIQUIDATION IS A CLOSURE PROCESS
May Continue DEPENDING ON THE ADMINISTRATOR'S STRATEGY
INSOLVENCY PROFESSIONAL
Required NOMINEE / SUPERVISOR
Required LIQUIDATOR
Required ADMINISTRATOR
BROAD DIRECTION
Recovery COMPANY CONTINUES IF ARRANGEMENT SUCCEEDS
Liquidation COMPANY ULTIMATELY DISSOLVED
Multiple Outcomes RESCUE, SALE, CVA OR LIQUIDATION MAY FOLLOW
THE VIABILITY QUESTION

Can the Underlying Business Realistically Continue?

Viability is one of the major distinctions when considering the future of an insolvent company. Insolvency does not automatically mean a company must close, but continued trading needs a credible financial and commercial basis.

COMPANY INSOLVENT
?
VIABLE FUTURE? YES

Restructuring or rescue procedures may warrant professional consideration.

VIABLE FUTURE? NO

An orderly closure process may need to be considered.

QUESTIONS THAT SHAPE THE DIRECTION

What Needs to Be Established First?

No single insolvency procedure should be viewed in isolation. The company's complete financial and operational position needs to be understood.

01 Is the Business Viable?

Is there a fundamentally sustainable business underneath the current debt and cash-flow pressure?

02 Can Ongoing Liabilities Be Paid?

Can the company meet wages, tax, suppliers and other new obligations while continuing to trade?

03 How Severe Is Creditor Pressure?

Are creditors simply requesting payment, or has the position progressed towards statutory demands, petitions or other action?

04 Is There Enough Cash?

Does the company have sufficient working capital to fund continued trading and any restructuring process?

05 Does the Business Need Protection?

Is immediate creditor action threatening the ability to preserve the business, assets or a potential rescue?

06 Is Closure More Realistic?

If continued trading is no longer viable, an orderly formal closure may need to be considered instead.

A MAJOR PRACTICAL DIFFERENCE

Who Controls the Company?

CVA DIRECTORS

Directors generally remain in control of the company while it continues trading under the arrangement.

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ADMINISTRATION ADMINISTRATOR

Control passes to the administrator while the company remains in administration.

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CVL LIQUIDATOR

Once appointed, the liquidator takes control of the liquidation and the directors' responsibilities change.

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ADMINISTRATION IS NOT SIMPLY "KEEPING THE COMPANY OPEN"

Administration can lead to several different outcomes.

An administrator may pursue a rescue, a Company Voluntary Arrangement, a sale of the business or assets, or a route into liquidation depending on the circumstances and the statutory objectives of the administration.

CVL IS FUNDAMENTALLY DIFFERENT FROM A CVA

A CVL is a closure process — not a restructuring plan.

In a creditors' voluntary liquidation, the insolvent company is closed down in an orderly manner. The liquidator secures and realises company assets for creditors and deals with the formal liquidation process.

TRADING COMPANY INSOLVENT
→
FORMAL PROCESS CVL
→
OUTCOME CLOSURE
THE PROCEDURE FOLLOWS THE CIRCUMSTANCES THE DIRECTION DEPENDS ON THE COMPANY — NOT THE NAME OF THE PROCEDURE.

Financial position, business viability, creditor pressure, available funding, assets, liabilities and the objectives of the directors all form part of understanding what professional insolvency input may be required.

FORMAL INSOLVENCY PROCEDURES Specialist professional involvement is required.

Stop Your Debt UK can help organise information, correspondence and the wider company debt position. Where formal insolvency advice or an insolvency appointment is required, the company must be dealt with by an appropriately authorised insolvency professional.

SUPPORT WHEN YOUR COMPANY IS UNDER PRESSURE

Facing Business Debt or Creditor Pressure?

START WITH THE COMPLETE POSITION

When a company is facing HMRC arrears, creditor demands or cash-flow pressure, understanding exactly what is happening can be the first step towards identifying what professional support may be required.

SYD
STOP YOUR DEBT UK

We Help Bring the Position Into Focus.

Stop Your Debt UK can help organise the information, documents and creditor correspondence surrounding your company, coordinate permitted administrative support and help connect you with an appropriately authorised professional where specialist insolvency, regulated debt or legal advice is required.

HOW WE WORK

Understand. Review. Connect. Support.

The purpose is to create a clearer picture of the company's circumstances and help ensure specialist matters reach the appropriate professional.

01
UNDERSTAND

Bring the Information Together

We help gather and organise the information, documents and correspondence needed to understand what is happening.

Creditor correspondence HMRC letters Company debts Demands & notices
02
REVIEW

Understand the Wider Position

The circumstances can be reviewed through our central support and case-coordination process so that the issues requiring attention are easier to identify.

Creditor pressure Key deadlines Personal exposure Professional needs
03
CONNECT

Reach the Appropriate Professional

Where formal insolvency advice, regulated debt advice, legal advice or another specialist service is required, we can help connect the case with an appropriately authorised professional.

Insolvency practitioners Regulated professionals Legal professionals Specialist support
04
SUPPORT

Ongoing Case Coordination

Stop Your Debt UK remains available for permitted administration, document support and case coordination throughout the wider process.

Document support Administration Case coordination Ongoing communication
BUILDING THE PICTURE

Business Debt Rarely Arrives as One Single Problem.

A director may be dealing with several issues at the same time. Bringing those issues together can make it easier to understand where the immediate pressure sits and which matters need specialist attention.

01 HMRC Arrears
02 Supplier Debt
03 Creditor Demands
04 Solicitor Correspondence
05 Court Documents
06 Personal Guarantees
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IMPORTANT — FORMAL INSOLVENCY WORK

A CVA Must Involve an Insolvency Practitioner.

Stop Your Debt UK does not act as the insolvency practitioner, nominee or supervisor of a Company Voluntary Arrangement.

WHERE FORMAL INSOLVENCY ADVICE OR AN APPOINTMENT IS REQUIRED

The matter must be handled by an appropriately authorised insolvency professional.

DIFFERENT PROBLEMS NEED DIFFERENT EXPERTISE

Support and Specialist Advice Are Not the Same Thing.

STOP YOUR DEBT UK

Administrative & Case Support

  • Organising correspondence
  • Gathering company information
  • Document assistance
  • Permitted administrative support
  • Case coordination
CONNECT
AUTHORISED PROFESSIONAL

Specialist or Regulated Work

  • Formal insolvency advice
  • CVA nominee / supervisor functions
  • Insolvency appointments
  • Regulated debt advice where required
  • Legal advice where required
WIDER COMPANY DEBT PROBLEMS Need to understand the complete business debt position?
Explore Business Debt & Insolvency →
RECEIVED A LETTER?

HMRC. Creditor. Solicitor. Understand What Arrived.

If the immediate problem is a letter, demand or formal-looking document, LetterChekr™ can help identify what the correspondence appears to be, highlight key information and explain it in plain English.

LetterChekr™

Received an HMRC, Creditor or Solicitor Letter?

Upload company debt correspondence to LetterChekr™ for a structured, plain-English explanation of what the document appears to be, who sent it, the important information identified and any dates or deadlines that may need attention.

01
Upload the correspondence

Choose a PDF, JPG or PNG copy of an HMRC letter, creditor demand, solicitor correspondence, statutory demand, court document or other company debt communication.

02
LetterChekr™ analyses the document

The tool looks for key information including the sender, amount, reference, document type, important dates and any deadline identified from the correspondence.

03
Get a plain-English explanation

See what the document appears to mean, the important points identified from it and general information about possible next steps.

LetterChekr™ provides an automated explanation of uploaded correspondence. It can help identify and explain information contained in a document, but it does not provide insolvency, legal or regulated financial advice and does not determine which formal insolvency procedure is appropriate for a company.

Stop Your Debt UK

LetterChekr™

Upload an HMRC, creditor, debt collection, solicitor, court-related or other company debt letter and get a clear, plain-English explanation of what the document appears to mean and what may need attention.
📄
Choose your letter
PDF, JPG or PNG • Maximum 10MB

Book a Call With a Consultant

Complete your details below and one of our consultants can discuss the correspondence with you, help organise the surrounding information and identify where specialist or regulated support may be required.

COMPANY VOLUNTARY ARRANGEMENT FAQ

Company Voluntary Arrangement Questions Answered.

QUICK ANSWERS

These frequently asked questions explain some of the main features of a Company Voluntary Arrangement and the issues directors commonly need to understand.

A Company Voluntary Arrangement, commonly called a CVA, is a formal insolvency procedure through which a company proposes an arrangement with its creditors for dealing with its debts.

Where the proposal is approved and the arrangement proceeds, the company can continue trading while the CVA is supervised by an insolvency practitioner.

An insolvency practitioner works with the company to formulate a proposal setting out how the company's debts will be dealt with and the payments that are proposed.

Creditors are then given the opportunity to consider and vote on the proposal. If the required approval thresholds are achieved, the arrangement can take effect and the company must comply with its agreed terms.

The main creditor approval threshold is at least 75% by value of the creditors participating in the decision procedure and voting on the proposal.

This is based on the value of the debts represented by the votes, rather than simply counting the number of individual creditors. Additional voting rules can also apply, including safeguards involving creditors who are unconnected with the company.

Yes. Where HMRC is a creditor, it can consider the proposal and vote on it. HMRC states that CVA proposals are considered on a case-by-case basis.

HMRC does not automatically support a proposal. Its published guidance says it will only vote in favour where it considers there to be a realistic chance that the proposal can be successfully implemented.

Generally, yes. One of the important distinctions between a CVA and some other formal insolvency procedures is that directors normally retain control of the company while it continues to trade.

The CVA itself is supervised by an insolvency practitioner. Remaining in control does not remove the directors' responsibilities for managing the company appropriately.

Yes. A CVA can allow a viable but insolvent company to continue trading while dealing with its creditor position under the agreed arrangement.

Continued trading still needs to be sustainable. The company must deal with its ongoing obligations as they arise and comply with the terms of the CVA.

There is not one universal duration that applies to every Company Voluntary Arrangement.

A CVA proposal sets out the payment schedule and the period over which the arrangement is intended to operate. The appropriate structure will depend on the company's circumstances and the terms of the proposal approved by creditors.

A CVA deals with the company's liabilities. A director's potential liability under a separate personal guarantee needs to be considered independently.

The wording of the guarantee, the underlying debt, any demand made by the creditor and the surrounding circumstances can all be important.

Understand Personal Guarantees →

A CVA depends on the company complying with the agreed terms and remaining capable of meeting its obligations.

If the company does not meet the agreed payment schedule, the arrangement can fail and creditors may take further action. Depending on the circumstances, this can ultimately include steps to wind up the company or consideration of another formal insolvency route.

They serve different purposes. A CVA is designed around restructuring the company's creditor position while a viable company continues trading. Liquidation is a process for winding up the company.

Which insolvency procedure may be appropriate depends on the company's financial position, viability, assets, liabilities, creditor position and other circumstances. Directors should obtain advice from an appropriately authorised insolvency practitioner.

RELATED BUSINESS DEBT HELP

Understand the Wider Position.

A CVA is only one part of the wider company insolvency landscape. The right starting point is understanding the company's debts, creditor pressure and any potential personal exposure affecting its directors.

01
DIRECTORS & BUSINESS

Business Debt & Insolvency

Understand company financial pressure, insolvency warning signs and the wider professional pathways that may need consideration.

→
02
DIRECTOR EXPOSURE

Personal Guarantees

Understand how company borrowing can create separate personal exposure for a director who has signed a guarantee.

→
03
CREDITOR ACTION

Creditor Pressure

Understand how creditor contact can escalate and why demands, notices and court correspondence should be reviewed carefully.

→
04
RECEIVED A LETTER?

LetterChekr™

Upload correspondence for a structured, plain-English explanation of what the document appears to be and what information may need attention.

→
STOP YOUR DEBT UK

Is Your Company Under Financial Pressure?

If creditors, HMRC arrears or cash-flow problems are putting pressure on the company, understanding the complete position early can help identify what needs attention and which professional expertise may be required.

Get Support → Use LetterChekr™ →
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Stop Your Debt UK provides permitted administrative support, document assistance and case coordination. We do not act as an insolvency practitioner and do not provide regulated insolvency, legal or financial advice. Where specialist or regulated advice is required, we can help connect you with an appropriately authorised professional.