Company Voluntary Arrangement (CVA) or Pre Pack Administration (Pre Pack)?

12th September 2023

When advising distressed companies, and refinance and delayed payment options are exhausted, then the choice for management is often between a CVA and a pre pack. In this blog we look at the factors to be considered when deciding which if either are suitable.  The individual circumstances will determine the choice but in general the following is appropriate.


A  CVA requires less funding than a pre pack as there is no acquisition price  to pay and the company’s working capital assets can be used to fund trading. It should however be assumed that no credit will be received from suppliers in the short/medium term. Monthly payments are then made to a Supervisor in order to make distributions to creditors. Buying a business from an Administrator requires the purchase price funding as well as start up cashflow funding.


For a CVA to be approved 75% of all creditors, and a majority of unconnected creditors must approve the proposal and the prospects of approval can be generally assessed at the outset. A pre pack sale of a business is highly regulated and it generally must be demonstrates that the business has been adequately marketed for sale.  The risk therefore is that a third party bids more for the business and it is sold.

Debt Forgiveness

Generally in a pre pack the assets are purchased and the creditors remain with the insolvent company. In a CVA HMRC must be paid in full as a preferential creditor, and then a dividend of pence in the £ is paid to unsecured creditors.  Where the HMRC debt is high this may result in a CVA not being viable.


A pre pack can be completed within a matter of weeks whereas a CVA would typically be between 3-5 years.  The trade off for customers is therefore dealing with a Phoenix company v a company subject to a CVA.  The impact will be sector driven as for example hospitality customers will be oblivious whereas government departments may have issues.

Transition issues

Again this is sector driven as some businesses will require licences/accreditations  which cannot be transferred to a newco whereas in a CVA they should be unaffected as the original entity remains intact. For example operator licences in the transport industry take 4 months plus to obtain and therefore newco could not operate.

Directors disqualification

There is no report by the Supervisor to the Insolvency Service in a CVA whereas there is a conduct report by the Administrator.  Again the risk of disqualification as a director can generally be assessed at the outset, however any decision to pursue disqualification lies with the Insolvency Service.

The above will vary depending upon the individual circumstances however for a CVA to be successful the business must be profitable going forward or it will be unable to pay monthly contributions and ultimately will fail. Where the HMRC debt is significant this may destroy the viability as HMRC insist on being paid in full before unsecured creditors receive a dividend.

The directors of KRE Corporate Recovery have over 80 years experience between them and are well qualified to set out the options available to management should they find themselves in the position where formal restructuring is necessary.


If you would like to discuss any of the above or have any queries, please do contact one of our Directors:

Paul Ellison – 07967471211

Rob Keyes – 07500933022

David Taylor – 07855231103

Gareth Roberts – 07979706392