A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
CVA vs Administration: Which Rescue Route?
Both a Company Voluntary Arrangement (CVA) and administration are rescue procedures designed to save a viable business, but they work very differently and suit different situations.
The Key Difference
- A CVA is a repayment plan. The company keeps trading under the directors' control and pays creditors a reduced amount over 3 to 5 years. It is relatively low-cost and less disruptive.
- Administration is a protective procedure. A licensed administrator takes control, a legal moratorium freezes creditor action, and the business is rescued, sold, or wound down. It is more powerful but more disruptive.
When a CVA Is Better
A CVA suits a company where:
- The business is viable and can afford monthly contributions
- The problem is historic debt, not ongoing trading viability
- Directors want to keep control
- Creditor pressure is not yet acute (no winding-up petition)
A CVA is gentler: the company keeps trading, staff keep their jobs, and creditors are bound to a single plan.
When Administration Is Better
Administration suits a company where:
- Creditor pressure is acute - a winding-up petition, HMRC enforcement, or landlord action
- The business needs immediate protection and time
- A sale of the business as a going concern is being considered (including a pre-pack)
- The company cannot fund ongoing trade without the moratorium
Administration is more powerful: the moratorium stops enforcement immediately, and an administrator can act quickly.
Can They Be Combined?
Yes. A common rescue structure is to enter administration to gain the moratorium, then propose a CVA to creditors to restructure the debts and return the company to directors' control. This combines the protection of administration with the restructuring of a CVA.
Speak to a Licensed IP
The choice between a CVA and administration - or a combination - depends on the company's viability and the level of creditor pressure. Our Manchester-based practitioners will advise honestly on the best route.