Company Voluntary Arrangements – an underused and underappreciated tool


Donald McNaught

Donald McNaught

Restructuring Partner

11 January 2017


A Company Voluntary Arrangement (CVA) is a formal deal between an insolvent business and its creditors (lenders), usually over three to five years, and can be a welcome rescue solution to companies experiencing financial hardship.

I was recently delighted to be involved in putting an arrangement into practice with the support of HM Revenue & Customs (HMRC), safeguarding 80 jobs in the week before Christmas. As a result, the Glasgow based company, which was facing an HMRC liquidation petition and the likely loss of jobs and customers, can now look forward to the protection of the CVA process.

Not only will this allow the company to continue to trade and benefit from the necessary breathing space to restructure, it will allow creditors to be paid in full. This was compared to an alternative liquidation outcome where creditors would likely receive nothing.

In situations like this, many company directors and advisers may look to phoenix a company, abandoning creditors and carrying on regardless with essentially the same business.  While on the face of it, this may seem an easier option, in the longer term that is unlikely to be the case, due to the potential reputational damage this could cause with customers and suppliers, as well as creditors taking more robust positions as they begin to recognise these behaviours. 

Now this company can look ahead to a brighter future where employees retain their jobs, HMRC continue to benefit from ongoing tax collections, and their landlords will retain a tenant. All round, this demonstrates that with some determination, hard work, and a little help from expert CVA advisors, a company can be turned around and brought back to profit.


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