How a CVA is set up
The directors prepare a proposal with a licensed insolvency practitioner acting as nominee. The proposal sets out what the company will pay, over how long, and how creditors will be treated. Creditors vote on it. If 75% of the voting creditors by value approve, the CVA binds all unsecured creditors, including the ones who voted against.
The supervisor, usually the same practitioner, monitors the payments. If the company keeps its side, it trades through the arrangement and the debts inside it are settled on the agreed terms at the end.
Why companies choose it
- The company survives and keeps trading, unlike liquidation.
- Directors stay in control of day-to-day operations.
- Debts can be reduced or rescheduled with creditor agreement.
- It stops enforcement action from creditors covered by the arrangement.
What it means if you are a supplier
If your customer enters a CVA, the money owed to you is inside the arrangement. You will be paid according to its terms, which usually means a reduced sum over years rather than the full amount now. You can still trade with the company, but on new terms: anything supplied after the CVA begins is a fresh debt, outside the arrangement.
A CVA is a sign of serious difficulty that the company is trying to manage, not a recovery in itself. Treat the company as high risk, watch whether the arrangement payments are being met, and check the supervisor's reports where available. CVAs frequently fail and convert to liquidation.
Check any England & Wales company free. R-Score, CCJs, winding-up petitions, charges and five years of accounts on every profile.