CVAs – divisive in nature, essential to many
Pannone Corporate

Company Voluntary Arrangements (CVAs) have grown in prominence in recent years, as businesses have sought to implement them as a means to continue trading in the toughest of conditions – most notably on the high street.

Most recently, Wilko is understood to be considering a CVA in a shake-up of its business and upmarket retailer, Robert Goddard, is the latest business in a growing list to use a CVA as a restructuring tool. The independent mini chain, which operates across 10 locations and employs 100 people, had its CVA approved by creditors at the end of June – a move that protects both its staff and retail outlets.

Despite their popularity, CVAs remain the subject of debate and discussion. Consider, for example, the landmark High Court ruling last year when a large London landlord overturned a CVA decision relating to one of its contractors [link –].

The increased use of CVAs to manage obligations to landlords, in particular, is clearly divisive – driven by the continued fall-out from a global pandemic and the current economic landscape, both of which are accelerating the fortunes and misfortunes of many businesses, particularly those on the high street. However, there are companies that have suffered irreparable damage in the last three years. As such, CVAs are a viable option for those businesses finding themselves unable to recover from the relentless challenges that have rained down on them since the beginning of 2020.

Whatever your view on the current framework, it’s hard to deny that CVAs have played, and continue to play, a vital role in enabling businesses to continue to operate.

So, how do CVAs work?

A company voluntary arrangement (CVA) is, in simple terms, a legally protected agreement between a company and its creditors to restructure its debt. There are very few rules about what terms a CVA can and cannot contain – the driving factor tends to be what the creditors of the company will realistically approve. Typically though, a CVA will entail an insolvent company repaying all or a proportion of its debts over an agreed period of time. Usually, this is between three to five years. Provided that the company complies with the terms of the CVA, it will effectively be free of the pre-CVA debt at the conclusion of the arrangement.

What are the benefits?

The biggest benefit of a CVA, provided that it is approved by the creditors of the company in question, is that it enables the insolvent business to continue trading more or less normally. A CVA also allows business owners to:

  • Keep control of the company – unlike administration or liquidation, when control of the company is passed to an insolvency practitioner, the directors maintain control of the business. A CVA is supervised by an insolvency practitioner, but that role tends to be significantly less hands on as compared to other insolvency procedures.
  • Reduce the debt pile– debt owed to creditors can be reduced.
  • Keep hold of contracts and accreditations– it is typically easier to retain key contracts, accreditations, licences and the like in the context of a CVA (as compared to administration or liquidation). This should be reviewed ahead of committing to a CVA though – a CVA will still often trigger insolvency related provisions in typical contracts.
  • Trim the fat – a CVA may facilitate the termination of certain contracts and leases to help ease the cost burden on the business. Again, however, you should seek advice if this is an outcome you wish to achieve – CVAs modelled in this way are not straightforward (as is demonstrated by the case law referred to above).
  • Breathing space– Importantly, CVAs allow you the time to restructure and make any necessary changes to the business model, laying the foundations for future growth.
  • Keep the cash flowing – cash flow is integral to the success of any business and a well thought out CVA can, indeed should, help to improve your cash flow.

Seemingly secure companies have found themselves in a fragile position in recent years – a prospect that may have seemed unfathomable as trading drew to a close at the end of 2019. Given the current state of affairs, with inflation causing the cost of doing business to swell, the price of funding becoming prohibitive to many, not to mention the debt pile gaining significant fat thanks to 13 consecutive interest rate rises, it’s becoming particularly difficult for cash-poor businesses with little working capital and growing liabilities to operate.

With so many unknowns and factors outside of the control of businesses, the key is to be prepared, flexible and open to opportunities for restructuring and re-organisation. It’s important for businesses to take a proactive approach, to keep their financial position under ongoing review and consider all of the possibilities potentially available in a timely manner. Waiting in hope may only minimise the options available and force businesses into increasingly difficult choices. A CVA may well be one answer to the issues a business faces.

If you’d like to discuss the blog in more detail, contact me on  (0) 7920 237687 or email

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