Typical situations
- The business can trade profitably going forward, but historic unsecured debt is too large to clear from current cash.
- HMRC or trade creditors will not support an informal plan of the size required.
- Directors want to keep the company and its contracts rather than place it into administration or liquidation.
- A previous Time to Pay arrangement has failed and a more binding structure is needed.
What a CVA is designed to do
A Company Voluntary Arrangement is a formal proposal to unsecured creditors, supervised by a licensed insolvency practitioner. If approved, it can compromise historic unsecured debt and set a contribution plan while the company continues to trade.
It is not a way to ignore secured lenders, and it does not remove the need for a viable underlying business. If the future cash flow cannot support the contributions, a CVA will fail.
When another option is better
If the company cannot pay its debts, has lost its core contracts, or needs a more immediate legal stay, administration may be more appropriate. If there is no viable business to protect, liquidation may be the cleaner route.
Turnwell helps directors compare those options before a process is chosen. Formal appointments are made by licensed insolvency practitioners. Our work is to make sure the board understands the commercial and personal implications first.
Construction CVAs have extra moving parts
Contractors considering a CVA also have to think about bonds, retentions, framework agreements and employer termination clauses. Those issues are covered on our construction CVA page.
Common questions
Does a CVA stop HMRC taking action?
A CVA can include HMRC as an unsecured creditor if the arrangement is approved. HMRC will still look at the proposal carefully and may not support it if ongoing compliance is weak or the contributions are unrealistic.
Will directors stay in control of the company?
In a CVA, directors usually continue to manage the company, subject to the terms of the arrangement and the supervisor's role. That is one reason boards compare it with administration, where an insolvency practitioner takes control.
Related services
Restructuring
Reshape historic debt, the operating model or the company structure where the underlying business remains viable.
Administration
Understand when administration, including a pre-pack sale, may protect value and when it is not the right process.
HMRC debt
Address VAT, PAYE and corporation tax arrears, including Time to Pay and the risk of HMRC enforcement.
Business turnaround
Stabilise trading, restore control and build a practical plan around the parts of the business that remain viable.
Related insights
Options when a company cannot pay HMRC
A practical guide for UK directors when VAT, PAYE or corporation tax cannot be paid on time, including Time to Pay and the limits of informal arrangements.
Director duties when a company is in financial difficulty
A clear explanation of how UK director duties shift as a company approaches insolvency, including creditor interests, continued trading and record-keeping.
