CVA Advantages and Disadvantages

Before deciding if a CVA is right for your company you should consider both the advantages and disadvantages. Remember these might be more or less relevant to you and your company depending on the circumstances.

Company Voluntary Arrangement Advantages and Disadvantages

Company Debt Expert James Falla discusses the pro's and con's of a Company Voluntary Arrangement (CVA). For more company debt advice visit

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Advantages of a CVA (Company Voluntary Arrangement)

1. Company Debt written off
Once a CVA is completed a significant amount of the company’s debt is written off. This leaves the business in a much better position to trade profitably and grow in the future.

2. Minimal start up Costs
A CVA can be started with minimum upfront cost compared to other company rescue solutions. The majority of fees charged for implementing and managing the Arrangement are taken from the monthly payments. The company does not have to find extra cash to pay these.

3. Legal Protection from Company Creditors
After a CVA is agreed the company gets legal protection from its creditors. The creditors who are included in the Arrangement are no longer allowed to take legal action against the company to collect their debts.

Once a CVA is implemented any legal actions currently being undertaken must be stopped. As such the Arrangement can be used to stop a Winding Up Petition.

4. Directors Conduct is not investigated
Using a CVA means that the company remains a trading entity. A liquidator is not appointed and there is no requirement for a review of the past conduct of the directors. As such there is no risk that a director could be accused of wrongful trading and banned from acting as a director or held liable for company debts.

5. Directors remain in control of the Company
Using a CVA means that the current Directors remain in control of the business. However as a condition of accepting the Arrangement the creditors might insist on certain changes to the management structure.

6. A CVA is a Private agreement
The Arrangement is private between the company and its creditors. The fact that it exists is publicised in the London gazette. However other than this it is not publicised and does not have to be advertised on the company’s correspondence. Having said that a record of the Arrangement is made on the company’s credit file. As a result anyone who carries out a credit check will discover its existence.

Disadvantages of a CVA (Company Voluntary Arrangement)

1. Company Credit Rating negatively affected
Once a CVA is agreed it is recorded on the company’s credit file. The record will remain on the file for 6 years making it difficult to get new credit facilities during this time.

2. Potential clients may be put off working with the Company
The existence of the Aerrangement may jeopardise new business relationships. Potential clients may carry out a credit check against the company as part of their due diligence. This will lead them to discover that a CVA is in place. As such they may be concerned about the financial stability of the company and be put off dealing with it.

3. Company restructuring and job losses may be required
One of the reasons why the company needs to start a CVA is that its current structure is not working. Even though the core business will not close the directors may need to make substantial cost savings. This may result in job losses due to restructuring or closure of less profitable parts of the business.

4. If a CVA fails the Company may be closed
Before agreeing the terms of a CVA the directors must be satisfied that the required payments can be met. If they are not and the agreement fails the company is likely to be closed. This could then leave the directors personally liable for company debt if they are found to be guilty of wrongful trading.

5. No mandatory changes to Company Management
When a CVA is implemented there will normally be no requirement for a change to the current Board or management structure. Creditors may insist on this as part of their acceptance of the proposal but this is rare. As a result bad management practices which might have been the reason behind the company’s past failures will remain unchecked.

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