What Are the Benefits of a Company Voluntary Arrangement (CVA) Over Liquidation?
A Company Voluntary Arrangement (CVA) offers an alternative to liquidation that can be highly beneficial for businesses struggling with debt but still viable as going concerns. This legal agreement allows a company to repay its debts over time while continuing to trade. For business owners and directors facing financial pressure, understanding the advantages of a CVA over liquidation is crucial. Below, we outline the key benefits and provide insight into how businesses across the UK, from major cities to small villages, can benefit.
Key Benefits of a CVA Over Liquidation
- Continue Trading
One of the biggest advantages of a CVA is that it allows the business to keep operating. Unlike liquidation, which typically results in the closure of the company and the sale of its assets, a CVA enables a company to maintain contracts, retain staff, and continue providing goods or services. This is vital for businesses that have strong customer relationships or future income streams that could help turn things around.
- Protection From Creditors
Once a CVA is agreed upon, creditors cannot take legal action against the company. This includes county court judgments (CCJs), winding-up petitions, or bailiff action. This breathing space allows directors to focus on business recovery, not fighting fires every day.
- Cash Flow Relief
CVA payments are typically based on what the company can afford, not what it owes. This can ease cash flow pressures significantly, allowing the company to stabilise and rebuild. Flexible monthly payments make budgeting more manageable. Many businesses in sectors like retail, hospitality, and construction benefit from this structured repayment plan.
- Avoids Director Investigations
In a liquidation, directors’ conduct is scrutinised by the Insolvency Practitioner, which may lead to disqualification or personal liability in extreme cases. With a CVA, there is no such formal investigation into director conduct, which provides peace of mind for directors trying to do the right thing.
- Reduced Creditor Pressure
A CVA consolidates debt into one affordable monthly payment. This stops constant calls, letters, and threats from creditors, helping to reduce director stress and support business recovery. Many businesses in cities like Birmingham, Manchester, and Bristol report better focus and morale once creditor pressure is eased.
- More Control
A CVA gives directors more control over the business during the restructuring process. In liquidation, the control is handed to a liquidator, and the company is dissolved. In a CVA, directors stay in place and work with the insolvency practitioner to oversee operations.
- Potential for Debt Write-Off
Many CVAs include a provision to write off a portion of the company’s unsecured debts. Once the CVA term is completed, remaining debts covered by the agreement are legally written off. This is particularly beneficial for companies with high levels of supplier or HMRC debt.
- Protect Jobs
A CVA allows the company to retain staff and avoid redundancies that would be inevitable in liquidation. TUPE regulations don’t usually apply as the company itself isn’t transferring, making employment continuity easier. This has helped employers across towns like Derby, Wolverhampton, and Portsmouth safeguard jobs and preserve local employment.
- Better for Reputation
Although a CVA is public record, it’s often viewed more positively than liquidation. It shows the company is working to repay its debts rather than abandoning them. Suppliers and customers may be more willing to continue working with a company under a CVA than one that enters liquidation.
- Lower Professional Fees
Compared to liquidation, a CVA usually involves lower insolvency practitioner fees, making it a more cost-effective route for struggling businesses. Companies in smaller areas such as Matlock, Buxton, and Hinckley often opt for CVAs because of this affordability.
Who Can Benefit From a CVA?
We help businesses across the UK, from bustling cities to small towns and rural villages. Whether you’re a café in Cambridge, a construction firm in Manchester, or a tech startup in Bristol, a CVA could be the lifeline your business needs.
Our clients come from all over the UK:
Major cities: London, Birmingham, Glasgow, Leeds, Sheffield, Edinburgh, Liverpool, Newcastle, Nottingham, Leicester, Southampton, Cardiff, Plymouth, Derby, Oxford, Reading, Manchester.
Growing towns: Bath, Cheltenham, Luton, Northampton, Wolverhampton, York, Exeter, Preston, Milton Keynes, Swansea, Portsmouth.
Smaller towns: Buxton, Matlock, Altrincham, Wigan, Bury, Hinckley, Maldon, Didcot, Louth, Newbury, Oswestry, Taunton, Truro, Stafford, Rugby, Telford, Redditch.
Villages: Alderley Edge, Eccleston, Haxby, Great Tew, East Ilsley, Cold Aston, Bibury, Uffington, Alfriston, Kelmscott, Hartfield, Beaulieu, West Chiltington, Castle Combe, Longhope.
Additional Advantages of a CVA
Improved Business Focus
With a CVA in place, directors and staff can concentrate on delivering value and improving operations, not dealing with creditor threats. Many companies use this time to restructure, review pricing, or launch new marketing strategies.
More Favourable HMRC Terms
A CVA can include HMRC tax arrears, which allows businesses with VAT or PAYE debts to avoid enforcement actions. Insolvency Practitioners often negotiate longer-term payment structures with HMRC within the CVA.
More Predictable Forecasting
A structured repayment plan through a CVA helps businesses make better financial projections. This allows directors to plan future investments, manage inventory, and make staffing decisions more confidently.
Preserves Value for Creditors
Creditors often receive a better return under a CVA than they would in a liquidation. This is because the company continues to trade, meaning future profits can help pay debts, rather than being shut down and stripped of value.
Suitable for a Range of Industries
We’ve supported businesses in hospitality, manufacturing, logistics, tech, retail, recruitment, marketing, and even healthcare through the CVA process. It’s a flexible tool that works for various business models.
Rebuild Supplier Relationships
Because the CVA formalises the debt situation, many suppliers are more willing to continue trading. This is especially useful for companies that rely on just-in-time ordering or perishable goods.
Business Continuity for Stakeholders
From landlords to local councils, stakeholders affected by a company’s insolvency often prefer a CVA. It allows continuity of contracts and avoids the disruption that liquidation typically brings.
Is a CVA Right for My Business?
If your business is fundamentally viable but facing temporary financial distress, a CVA may be a more appropriate solution than liquidation. It’s essential to speak with an expert insolvency adviser who can assess your company’s circumstances.
We work closely with a panel of experienced, licensed Insolvency Practitioners across the UK. Whether you are in Stoke-on-Trent, York, Leicester, or smaller locations such as Saffron Walden or Wareham, our network can help.
Conclusion
A Company Voluntary Arrangement can be a lifeline for struggling businesses. It provides breathing space, protects jobs, and allows the business to keep trading under more manageable financial terms. It also avoids the reputational and operational impact of a company liquidation.
Whether you’re operating in a large city or a rural village, a CVA could be the financial restructuring solution that puts your business on a better path. From London to Louth, Birmingham to Bibury, we are here to help you assess your options and plan your recovery.
Make the right move for your business — explore a CVA today.