A Company Voluntary Arrangement (CVA) and Administration are both formal insolvency procedures that can be used to rescue a company experiencing serious financial difficulty.

However, they work very differently.

The biggest distinction is usually control.

Under a CVA, the directors normally continue running the business while making payments under an agreed arrangement with creditors.

In Administration, control of the company passes to a licensed insolvency practitioner acting as the administrator.

💡 Quick Answer

A CVA is generally more suitable where the underlying business remains viable, directors can continue running it and the main problem is historic creditor debt.

Administration may be more appropriate where immediate protection from creditors is required, significant restructuring is needed or the business or its assets may need to be sold.

Directors normally remain in control during a CVA. In Administration, control passes to the administrator.

CVA vs Administration at a Glance

	CVA	Administration
Main objective	Restructure debts and rescue company	Rescue/restructure or achieve best creditor outcome
Director control	Usually retained	Passes to administrator
Company continues trading	Usually	Often, depending on strategy
Creditor approval	Required	Not required to appoint administrator
Creditor protection	Limited compared with Administration	Statutory moratorium protects company
Historic debt	Restructured through CVA	Dealt with through Administration/outcome
Business sale	Not normally central	Can be part of strategy
Pre-pack sale possible	No	Yes
Company can survive	Yes	Yes, depending on outcome

Advantages of a CVA

A Company Voluntary Arrangement is a formal agreement between a company and its creditors.

It allows a viable company to restructure qualifying debts and make agreed payments over a period of time while continuing to trade.

For the proposal to be approved, at least 75% by value of creditors who vote must support it, subject to additional rules involving unconnected creditors.

Once approved, directors normally continue managing the company while the insolvency practitioner supervises the arrangement.

A CVA therefore tends to suit businesses where:

the underlying business remains viable;
directors can continue running it effectively;
historic debt is the main financial problem;
future cash flow can support affordable repayments; and
creditors are likely to support the rescue.

What Is Administration?

Administration is a formal insolvency procedure in which a licensed insolvency practitioner is appointed as administrator.

Once appointed, the administrator takes control of the company’s affairs, business and assets.

Administration provides powerful statutory protection because creditors are generally prevented from taking or continuing certain enforcement action without permission.

The administrator then considers the most appropriate route for the business.

This could include:

rescuing the company;
negotiating a CVA;
restructuring operations;
selling the business;
selling assets; or
moving the company towards liquidation.

Government guidance confirms that an administrator may themselves propose a CVA where this offers an appropriate rescue route.

The Biggest Difference: Who Controls the Company?

This is often the clearest distinction.

In a CVA

The existing directors usually remain responsible for running the business.

The insolvency practitioner acts as supervisor of the arrangement rather than replacing management.

In Administration

The administrator takes control.

Directors lose their authority to manage the company independently while Administration continues.

For directors who have a viable business and simply need to restructure historic debt, retaining control through a CVA can be attractive.

Where more significant intervention is required, Administration may provide a stronger framework.

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Which Gives Better Protection From Creditors?

Administration provides stronger immediate protection.

Once a company enters Administration, a statutory moratorium restricts creditors from taking enforcement action or starting winding-up proceedings without the required permission.

A CVA does not automatically provide the same blanket protection simply because a proposal is being prepared.

Once a CVA is approved, creditors bound by the arrangement must follow its terms in relation to covered debts.

But where urgent action is threatened before approval, such as a winding-up petition or aggressive enforcement, Administration or another form of moratorium may need to be considered.

Which Option Is Better for Continuing to Trade?

Both procedures can allow trading to continue.

CVA

Continued trading is usually central to the arrangement.

The company needs future profitability and cash flow strong enough to meet both:

its CVA contributions; and
all new trading liabilities.

Administration

The administrator may continue trading the business where this helps achieve the objectives of the Administration.

However, continuation is not guaranteed.

The administrator may instead decide that a sale or closure produces the best available outcome.

What Happens to Company Debt?

Under a CVA

Qualifying creditor debts are dealt with under the approved arrangement.

Creditors may receive all or part of what they are owed depending on the proposal.

Under Administration

The company’s debts remain claims against the insolvent company and are dealt with according to the Administration strategy and statutory creditor priorities.

The administrator may sell assets or the business to generate funds for creditors.

Administration is therefore not simply another form of repayment plan.

CVA vs Administration: Which Is Faster?

The answer depends on what you mean by “faster”.

A CVA may take time to prepare and gain creditor approval, then normally runs for several years.

Administration can be implemented much more rapidly where urgent protection is required.

However, an Administration itself can continue for up to a year automatically and can potentially be extended.

For directors, speed should therefore be considered alongside the objective.

If immediate protection is essential, Administration may be more suitable.

If the company has time to negotiate an affordable restructuring, a CVA may be preferable.

What Is Pre-Pack Administration?

A Pre-Pack Administration is a particular type of Administration.

A sale of the company’s business and assets is negotiated before the administrator is appointed and completed shortly after Administration begins.

This can help preserve:

business value;
jobs;
customer relationships; and
continuity.

The purchaser may sometimes include existing directors, although transactions involving connected parties are subject to additional scrutiny.

Pre-pack Administration should therefore be seen as one possible Administration strategy, rather than being synonymous with Administration itself.

CVA vs Pre-Pack Administration

A CVA generally keeps the same company trading.

A pre-pack usually involves selling the business and assets, potentially into a different legal entity.

This makes the commercial outcome quite different.

A CVA may make sense where the existing company can realistically survive and repay creditors.

A pre-pack may be more appropriate where the underlying business has value but the existing company’s financial structure makes continued trading difficult.

When Might a CVA Be Better?

A CVA may be more appropriate where:

the underlying company remains viable;
directors want to retain control;
the main issue is historic unsecured debt;
creditor support is realistic;
the company can make affordable contributions;
no immediate sale is required; and
urgent Administration protection is unnecessary.

Read our CVA Process guide for the steps involved.

When Might Administration Be Better?

Administration may be more appropriate where:

creditors are threatening immediate enforcement;
the company requires statutory protection;
substantial restructuring is necessary;
a business or asset sale is likely;
directors cannot continue managing the company normally;
creditor support for a CVA appears unlikely; or
Administration could preserve more business value.

A CVA can still potentially emerge from Administration if the administrator later considers it the best rescue solution.

Is a CVA Cheaper Than Administration?

Often, a CVA may involve a less disruptive insolvency process than Administration, but costs vary substantially according to complexity.

Both procedures require a licensed insolvency practitioner.

Administration can involve significant professional costs because the administrator assumes control of the business and may need to trade, restructure or sell it.

Price alone should not determine the decision.

The procedure needs to achieve the right outcome for the company and its creditors.

CVA or Administration: How Do Directors Decide?

A useful starting point is to ask:

Does the existing company simply need its historic debt restructured, or does the business require immediate protection and significant intervention?

If the company is viable, management remains effective and affordable repayments are possible, a CVA may provide the less disruptive rescue route.

If the business needs urgent creditor protection, management control needs to change or a sale may be required, Administration is likely to deserve closer consideration.