CVA vs CVL: Rescue the Company or Wind It Up?
A CVA keeps a company trading under a creditor-approved repayment deal; a CVL closes an insolvent company for good. How the two differ, and how to tell which fits.
They sound almost the same and both are "voluntary", but a CVA and a CVL sit at opposite ends of the insolvency spectrum. One is a rescue; the other is an ending. Here's how to tell them apart.
The one-line difference
- A Company Voluntary Arrangement (CVA) keeps the company alive, trading its way out of trouble by repaying creditors an agreed amount over time.
- A Creditors' Voluntary Liquidation (CVL) closes the company down, sells its assets, pays out what it can, and dissolves it.
If the business has a viable future, a CVA may save it. If it doesn't, a CVL draws a line under it.
What is a CVA?
A CVA is a formal, legally binding agreement under Part 1 of the Insolvency Act 1986 between a company and its creditors. The company proposes to pay back an agreed proportion of its debts — often from future trading profits — over a set period, typically three to five years.
Key features:
- The company keeps trading and directors stay in control, supervised by a licensed insolvency practitioner (the "supervisor").
- Creditors vote on the proposal. It is approved if 75% or more by value of voting creditors agree, and once approved it binds all unsecured creditors, including any who voted against.
- Creditors typically accept a CVA because it offers a better return than liquidation would.
CVAs are well suited to fundamentally sound businesses with a temporary debt problem — for example a chain that needs to shed onerous leases while keeping its profitable core.
What is a CVL?
A CVL is the standard way to close an insolvent company. Shareholders resolve to wind up, a licensed insolvency practitioner is appointed liquidator, assets are sold, creditors are paid in the statutory order, and the company is dissolved. There is no rescue and no future trading — the company ceases to exist.
Side-by-side
- Goal: CVA rescues and repays; CVL closes and distributes.
- Does the company survive? CVA — yes; CVL — no.
- Who runs it? CVA — directors, supervised; CVL — a liquidator replaces the directors.
- Trading: CVA — continues; CVL — stops.
- Creditor vote: both need 75% by value, but for very different outcomes.
- Best when: CVA — the business is viable but over-indebted; CVL — there's no realistic future.
What if a CVA fails?
A CVA depends on the company hitting its payment targets. If it can't keep up, the arrangement can fail, and the company often ends up in administration or a CVL anyway. A CVA is therefore best seen as a genuine turnaround plan, not a way to delay the inevitable.
How to choose
The honest test is whether the business can trade profitably going forward once its historic debt is restructured:
- Yes → a CVA (or possibly administration) may preserve value and jobs.
- No → a CVL is the responsible, orderly way to close, and protects directors from the risks of continuing to trade while insolvent.
Only a licensed insolvency practitioner can advise which fits a specific company.
See real outcomes in the data
Insolvency List tracks CVAs, liquidations and administrations together. Filter the live feed by procedure to compare how often each is used, or explore an industry to see which sectors lean on CVAs versus liquidation.
*This article is general information, not legal or financial advice. Speak to a licensed insolvency practitioner about the right procedure for your company.*
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