CVA vs administration
A Company Voluntary Arrangement and administration are both rescue routes for a viable but struggling company, and the choice between them depends on how much protection you need and whether you want to keep control. In a CVA the directors keep running the company and repay creditors over a fixed period, usually three to five years. In administration a practitioner takes control and a legal moratorium immediately stops creditor action. Insolvency Act 1986; Insolvency Service
- CVA
- Repay debt over 3 to 5 years; directors keep control
- Administration
- Practitioner takes control; moratorium stops creditor action
- Choose CVA if
- The business is sound and can afford realistic payments
- Choose administration if
- You need urgent protection, or a sale is the best outcome
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Which route: CVL, CVA or administration?
1. Is the underlying business viable and worth saving? If not, the route is a CVL.
2. If it is viable, does it need urgent protection, or is a sale the best outcome? If yes, administration. If it can pay over time, a CVA.
- CVLCreditors' Voluntary Liquidation
- Business not viable. Close it properly: assets are sold, creditors paid in order of priority, the company dissolved.
- CVACompany Voluntary Arrangement
- Sound business, affordable payments. Directors keep control and repay creditors over 3 to 5 years, supervised.
- AdministrationRescue or going-concern sale
- Needs urgent protection or a sale. A practitioner takes control and a moratorium stops creditor action.
At a glance
| CVA | Administration | |
|---|---|---|
| What it is | A binding agreement to repay creditors over time | A formal procedure where a practitioner takes control |
| Who keeps control | Directors keep running the company, supervised | A practitioner acting as administrator takes control |
| Protection from creditors | Limited; the deal binds creditors once approved | Immediate legal moratorium stops creditor action |
| Repayment | A proportion of debt, usually over 3 to 5 years | Via restructure, sale, or the process |
| Best for | A sound business that can afford realistic payments | A company needing urgent protection or a sale |
| Typical length | A fixed term, usually 3 to 5 years | A defined administration period |
Control versus protection
A CVA keeps you in control but offers less immediate protection; administration offers strong protection but hands control to a practitioner. The right balance depends on creditor pressure and the rescue plan.
A CVA is a binding agreement to repay creditors a proportion of what they are owed, under the supervision of a Licensed Insolvency Practitioner. It works well when the business is fundamentally sound but burdened by historic debt and can afford realistic monthly payments. Administration is more interventionist: its moratorium stops creditor action, including any winding-up petition, so it suits a company that needs urgent protection from creditors, or where a sale or major restructuring is the best outcome. A practitioner will advise which fits your situation.
Common questions
Which gives more protection from creditors?
Administration. Its legal moratorium immediately stops creditor action, including any winding-up petition. A CVA offers more limited protection: the deal binds creditors once it is approved.
Can a company do a CVA and administration together?
Yes, in some cases a company enters administration for protection and then proposes a CVA to repay creditors over time. A practitioner will advise whether that combined approach fits.