What is the Difference Between CVA and Administration?

Administration vs CVAThere are a number of difference between administration and company voluntary arrangement (CVA) for companies that have fallen into financial difficulty.

Company administration is a formal insolvency procedure whereby an Insolvency Practitioner (IP) will take control of the company, take steps to assess its financial health and then recommend one of six available options for the company’s future.

This option looks to rescue the company as a going concern, protect its employees, creditors, or both.

On the other hand, a company voluntary arrangement gives creditors more involvement in the business’ recovery than they would have in company administration by allowing them to agree to an arrangement outlining how their debt will be repaid over time.

Despite facilitating an agreement between a company and its creditors which can result in money saved for both parties, CVA does not sacrifice the company itself if the IP deems it best for stakeholders.

Both company administration and CVA provide viable solutions when managed appropriately; however it is important to note that each process involves multiple levels of complexity and should only be undertaken with professional assistance from an IP

What is a Company Voluntary Arrangement (CVA)?

A Company CVA is a formal procedure, governed by UK insolvency law, that enables a company to come to an agreement with its creditors. This legally binding arrangement comes at the request of the directors and is handled by an insolvency practitioner. The effect of the CVA is that it prevents further action from creditors while providing a way for them to receive payments over the agreed period of time.

Through the CVA, companies can remain in business while reducing costs and repaying debts over extended periods of time, ultimately seeking to return to financial stability.

What is Administration of a Company?

Administration of a company is the monitoring, management and oversight of all activities within a business organization. Administrative processes often involve controlling and directing resources, such as financial capital, technology, people, information storage and products or services.

This specific insolvency process in the UK designed to help keep companies trading through an administration that is pre-arranged with creditors before being placed into administration. This approach can often result in faster turnaround times compared to traditional administrations, while allowing stakeholders to make decisions that they believe are in the best interests of the company.

The Difference Between Administration and CVA

Administration is a legal process that allows a company that is experiencing financial difficulties to restructure its affairs, finances, and debt in an effort to avoid liquidation. An administrator is appointed to manage the company’s affairs and to develop and implement a plan to try to rescue the company as a going concern. The primary goal of administration is to try to save the company and its jobs, rather than to maximize the return to creditors.

A Company Voluntary Arrangement (CVA) is a formal agreement between a company and its creditors to repay all or part of its debts over an extended period of time. A CVA is typically proposed by the directors of the company as an alternative to administration or liquidation.

Under a CVA, the company continues to trade and the directors remain in control, but the CVA sets out the terms under which the company will pay its debts, which may include reduced payments to creditors. A CVA requires the approval of a majority of the company’s creditors, and once approved, it binds all creditors, even those who did not vote in favor of the CVA.

In summary, administration is a process that allows a company to restructure its affairs and finances in an effort to avoid liquidation, while a CVA is a formal agreement between a company and its creditors to repay its debts over an extended period of time.

Here are the main differences between a CVA and administration:


A CVA can be pursued by a business that is not yet insolvent, as a proactive measure to address financial challenges before they become unmanageable. If a company’s directors become aware that their firm is experiencing financial difficulty, they can choose to apply for a CVA in order to negotiate a plan to repay debts and avoid insolvency. This proactive approach allows the company to take control of the situation and potentially avoid more severe consequences such as administration or liquidation.


If a business is able to successfully adhere to the terms of a CVA, there is a strong possibility that it will be able to continue operating. On the other hand, if the business is unable to meet the requirements of the CVA, the directors may be faced with the prospect of liquidating the company. In contrast, the goal of the administration process is often to try to rescue the business as a going concern, rather than necessarily resulting in the sale of assets or the entire business. However, if the administrator determines that the situation is beyond salvaging, the sale of assets or the business may be necessary.


During the CVA process, the company’s directors retain control of the business, allowing them to continue operating the company and potentially trade their way out of financial difficulties. This can be particularly useful in specialized industries, where the directors’ deep understanding of the sector can be leveraged to turn the business around. In contrast, during the administration process, a licensed insolvency practitioner takes control of the company and makes decisions on behalf of the directors.

While the administrator may seek input from the directors, they ultimately have the final say on the outcome of the company. This can result in a loss of control for the directors, who may have little influence on the eventual resolution of the company’s financial difficulties.


A CVA allows a company to continue operating with minimal disruption to its day-to-day operations, while an administration may place restrictions on the company’s ability to trade. An insolvency practitioner may choose to allow the business to continue trading if it is believed that creditors will ultimately receive a greater benefit from the company remaining open.

However, if the financial difficulties are severe and the company’s future is uncertain, the practitioner may decide to halt operations in order to protect creditors’ interests. In contrast, a CVA allows the company to continue trading while working out a plan to repay its debts, making it a potentially more attractive option for businesses that are struggling but still viable.

Tax Implications

One potential advantage of a CVA is that it allows company directors to use the company’s previous years’ tax losses to offset its future tax liabilities. This can provide the business with some financial relief as it works to repay its debts. In contrast, the administration process immediately begins a new tax period for the business, which means that any previous tax losses cannot be carried forward.

This can create additional financial challenges for the company, as it may be unable to utilize any past tax losses to offset its current tax liabilities. This difference between a CVA and administration may be an important factor for directors to consider when deciding which course of action to take in the face of financial difficulties.

Director Investigations

A CVA is only granted to companies that are considered to be viable, so there is no need for an investigation into the directors’ conduct. This means that the directors can focus on implementing the CVA and working to turn the business around, without worrying about potential personal consequences.

In contrast, the administration process may involve an investigation into the company’s management leading up to the administration, as the insolvency practitioner has a duty to assess how the company was run. This can be a time-consuming and potentially stressful process for the directors, who may be concerned about their personal liability. This difference may be an important factor for directors to consider when deciding whether to pursue a CVA or administration in the face of financial difficulties.

Read more: Is going into administration the same as going bust


In conclusion, administration and CVA are two options available to companies experiencing financial difficulties. Administration is a legal process that allows a company to restructure its affairs and finances in an effort to avoid liquidation, with the appointment of an administrator to manage the company’s affairs. A CVA is a formal agreement between a company and its creditors to repay all or part of its debts over an extended period of time.

While a CVA allows the company to continue trading and the directors to remain in control, it requires the approval of a majority of the company’s creditors.

Both administration and CVA can provide a way for a company to address its financial challenges and try to avoid insolvency, but they have some important differences in terms of the impact on the company’s operations, the involvement of directors, and the investigation of directors’ conduct.

Steve Jones Profile
Insolvency & Restructuring Expert at Business Insolvency Helpline

With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.