Voluntary arrangements

  • ​Even if your business is insolvent, you may be able to make an arrangement to pay back creditors over time which means you may be able to carry on trading.
  • You would not be doing anything wrong if there is a reasonable prospect of being able to trade out of your difficulties.
  • If you are finding it difficult to get creditors to agree to your repayment offers, a voluntary arrangement is a more formal way of negotiating with them.

Individual voluntary arrangements

An individual voluntary arrangement (IVA) is set up by an insolvency practitioner (IP). It is a legally binding agreement that you pay back creditors over a set period of time. This can be monthly instalments, a lump sum payment, or a combination of both.

There are fees to set up an IVA but these can be normally be taken from any payments you make into the IVA, instead of being paid up front.  If you are a sole trader you can include business and personal debts. You would normally be able to carry on trading. However, it could mean that you find it more difficult to get business banking facilities or credit facilities, for example with suppliers. This is because the IVA would be on your credit file for six years.

Partnership voluntary arrangements

A partnership voluntary arrangement (PVA) is set up by an IP. It is a legally binding agreement that means you pay back creditors over a set period of time. This can be monthly instalments, a lump sum payment, or a combination of both. There are fees to set up an PVA but these can be normally be taken from any payments you make into the PVA, instead of being paid up front.

See our fact sheet:

Partnerships.

If you are in a partnership, the partnership can include any partnership debts in the PVA. It is common for each partner to set up an IVA at the same time. This is because partners are also personally liable for any partnership debts. Setting up an IVA at the same time means these debts are also dealt with and creditors cannot take further action against the individual partners.

It can be very difficult for a partnership to continue to trade if it enters in a PVA. Contact us for advice.

Company voluntary arrangements

A company voluntary arrangement (CVA) is set up by an IP. It is a legally binding agreement that you pay back creditors over a set period of time. This can be monthly instalments, a lump sum payment, or a combination of both.

There are fees to set up a CVA but these can normally be taken from any payments you make into the CVA, instead of being paid up front. Debts owed by the limited company can be included in a CVA. If you are also personally liable for any company debts, for example if you have given a personal guarantee, you will need to make a separate arrangement to pay back any more money owed on these debts yourself.

See our fact sheet:

Limited companies.

A limited company can continue to trade if it enters into a CVA. However, it could mean that the company finds it more difficult to get business banking facilities or credit facilities, for example with suppliers. This is because the CVA would be on the company credit file for six years