How to Avoid Liquidation With CVA

Facing mounting financial pressure can be overwhelming for any business owner. While liquidation may appear inevitable, it is not the only path forward. A Company Voluntary Arrangement (CVA) can provide a structured, legally binding way to manage debt while allowing a business to continue trading. With the right guidance, companies can protect jobs, safeguard relationships, and secure a sustainable future without resorting to closure.

This article explains how a CVA works, the steps involved, and how to avoid liquidation with CVA.

Understanding Liquidation and Its Consequences

Liquidation is the process of closing down a company by selling its assets to repay creditors. While sometimes unavoidable, it can have lasting consequences. Businesses that go through liquidation often face:

• Immediate closure and redundancies

• Loss of control as a liquidator assumes responsibility

• Damage to reputation and stakeholder trust

• Disruption to customer and supplier relationships

• Limited opportunity to rebuild credibility in the market

For directors, liquidation often feels like the end of the road. However, there are alternatives that protect business value and allow operations to continue. A CVA is one of the most constructive solutions available.

What is a Company Voluntary Arrangement (CVA)?

A CVA is a legally binding agreement between a company and its creditors, enabling debts to be repaid over a fixed period while trading continues. Supervised by a licensed insolvency practitioner, it provides a lifeline to businesses facing financial distress.

Unlike liquidation, a CVA:

• Keeps directors in control of day-to-day operations

• Preserves jobs by allowing staff to remain employed

• Maintains supplier and client relationships

• Protects the company’s reputation and long-term viability

By showing creditors a realistic plan for repayment, a CVA helps companies demonstrate accountability and a genuine commitment to recovery.

The Benefits of Choosing a CVA Over Company Liquidation

A Company Voluntary Arrangement (CVA) can offer struggling businesses a vital alternative to liquidation, reshaping the path from potential closure towards stability and growth. Building on the earlier discussion of liquidation risks, a CVA provides companies with an opportunity to regain control, rebuild confidence, and maintain day-to-day operations, all while meeting creditor obligations in a structured manner.

For businesses struggling with cash flow problems or creditor pressure, a CVA offers significant advantages:

• Continued trading: Companies can carry on operating while addressing debt.

• Tailored repayment terms: Repayments are structured to reflect actual trading prospects.

• Creditor confidence: Creditors often support CVAs as they recover more than they would through liquidation.

• Job protection: Employees benefit from stability and reduced uncertainty.

• Safeguarding reputation: Avoiding liquidation helps maintain trust with clients, suppliers, and investors.

This combination of financial restructuring and operational continuity makes a CVA one of the most effective business rescue tools available.

How Nexus Corporate Solutions Supports Businesses

Every company’s challenges are different, so one-size- fits-all solutions rarely succeed. At Nexus Corporate Solutions, licensed insolvency specialists create bespoke CVA proposals tailored to each business’s circumstances.

The process begins with a confidential assessment that reviews:

• Cash flow and creditor obligations

• Existing contracts and liabilities

• Future trading potential

From this, a customised CVA plan is developed with repayment terms that are achievable for the company and acceptable to creditors.

Nexus also plays an active role in:

• Negotiating with creditors on your behalf

• Anticipating and addressing creditor concerns

• Providing ongoing support throughout the CVA process

This hands-on approach helps ensure the company not only avoids liquidation but also builds a foundation for recovery and growth.

Essential Steps to Start a CVA

Taking the first steps towards a Company Voluntary Arrangement is a decisive move for businesses seeking to avoid the pitfalls of liquidation. With guidance from a trusted partner like Nexus Corporate Solutions Limited, it’s possible to shift from uncertainty to structured recovery.

This stage is all about laying the groundwork: evaluating your business’s position, rallying support from stakeholders, and methodically preparing for negotiations with creditors. When these essential steps are approached with clarity, transparency, and professional insight, companies not only increase their chances of success but also demonstrate commitment to a positive future to everyone involved.

Starting a CVA requires careful planning and professional guidance. The key steps include:

1. Assessing financial position – Gather financial records, analyse cash flow, and identify pressures.

2. Engaging a licensed insolvency practitioner – Work with experts to design a realistic and sustainable CVA proposal.

3. Building stakeholder trust – Communicate openly with employees, suppliers, and customers to show that the business is taking proactive action.

4. Preparing forecasts and contingency plans – Demonstrate to creditors how repayment will work and what steps are being taken to improve efficiency.

5. Presenting the proposal to creditors – Creditors vote on the plan, and approval requires support from at least 75% (by debt value).

When these steps are followed transparently and strategically, the likelihood of creditor approval increases significantly.

Practical Tips for Preparing Your Business

Before presenting a CVA, businesses can strengthen their position by:

• Maintaining open communication: Keep staff and suppliers informed to reduce uncertainty.

• Streamlining operations: Identify cost-saving measures to demonstrate commitment to recovery.

• Providing accurate data: Ensure financial statements are up to date to build credibility with creditors.

• Showing adaptability: Incorporate flexibility into the repayment plan to account for changing market conditions.

This proactive preparation reassures stakeholders and demonstrates a clear commitment to long-term stability.

CVAs Compared to Other Insolvency Options

Many business owners considering a Company Voluntary Arrangement want to understand how it differs from other insolvency options and what to expect from the process. Below are some of the most important points to know.

CVA vs. Liquidation

A CVA is very different from liquidation. While liquidation results in the closure of the business and the sale of assets, a CVA allows the company to remain operational. This means directors stay in control, staff retain their jobs, and relationships with clients and suppliers can be preserved.

Business Survival After a CVA

Companies that enter into a CVA often have a genuine chance of recovery. By restructuring debts in a realistic and legally binding way, businesses can trade out of financial difficulty and rebuild stability over time.

How Long a CVA Lasts

Most CVAs run for a period of three to five years. The exact duration depends on the repayment terms agreed with creditors and the company’s ongoing performance. This timeframe allows businesses to spread repayments in a manageable way.

The Role of an Insolvency Practitioner

An insolvency practitioner is central to the CVA process. Acting as a licensed professional, they guide directors through the planning stage, liaise with creditors, and ensure that the agreement complies with all legal requirements. Their role also includes monitoring progress and supporting both the business and its creditors throughout the arrangement.

Take Action to Protect Your Business

If your company is facing financial difficulties, don’t wait until liquidation becomes the only option. A Company Voluntary Arrangement could provide the structured recovery plan you need to safeguard jobs, maintain operations, and restore confidence in your future.

The sooner you act, the more options you will have. Contact the specialists at Nexus Corporate Solutions today for a confidential consultation and discover how a CVA can help your business move forward with stability and resilience.

Speak to an insolvency expert today.