What ONS Insolvency Data Reveals About the Case for CVA Reform?

Company insolvencies in June 2026 consisted of 276 compulsory liquidations, 1,364 creditors’ voluntary liquidations (CVLs), and 191 administrations, but only 14 company voluntary arrangements (CVAs). Given that restructuring plans for larger companies remain expensive and involve a great deal of work to secure creditor class buy-in – albeit with the threat of a cram-down – it is notable that they have been largely welcomed as an effective restructuring tool. It is therefore a shame that the CVA cannot be made to work better, especially given there is a large majority of small to medium-sized businesses needing help.

In order to make CVAs more attractive and for them to gain wider use, a number of core issues need to be addressed, such as high failure rates, landlord pushback, and complex voting rules.

There are a few things that could be considered: first, streamlining creditor voting thresholds by lowering the 75% approval value rule or redefining how unconnected creditor blocks can veto a plan to prevent minority obstruction, and/or splitting creditors into distinct classes, as in restructuring plans (e.g. suppliers versus property landlords). This means that terms can be tailored fairly without triggering wide-scale court challenges for unfair prejudice. Other considerations include protecting against unfair lease litigation, and lowering setup costs.

Another consideration is that shortening or limiting the post-approval challenge window for landlords to reduce expensive litigation might prevent the frequent stalling of retail turnarounds.

Standardising the initial costs charged by an Insolvency Practitioner to make the process accessible for smaller businesses before cash runs out would also help, although one cannot underestimate the time needed to understand the commerciality involved in a particular business.

There is also the usual handicap in CVAs -- no moratorium – that could be cured by pairing the CVA process more smoothly with formal debt moratoriums, so companies get uninterrupted breathing space from winding-up petitions.

In this brave new world, it should be possible to expand standardised e-voting and virtual meeting protocols permanently to speed up consensus-building. Whilst HMRC, usually a creditor, does participate in voting, it can get mired in modifications and make things expensive and complex, and it would be helpful if a more pragmatic approach was taken.

Finally, HMRC having an effective veto as a secondary preferential creditor often makes CVAs unviable. Furthermore, CVAs can’t cram down secured lenders without their consent, so if secured bank lenders, invoice discounters and HMRC are effectively taken out of the equation, the low number of CVAs is easier to understand.

Interestingly, this year, the Scottish courts in The Advocate General for Scotland for an order under section 6(4) of the Insolvency Act 1986 (Court of Session) [2026] CSOH 29 (25 March 2026) made inroads into a pushback on litigation preferring a broader, fairness-based approach in rejecting an unfairness challenge by HMRC. This was the Petrofac CVA, where the CVA was approved by 85.9% in value of creditors voting.

HMRC complained that its vote was “drowned out” because the CVA was approved by creditors whose claims were not compromised or were connected, providing an advantage to those creditors at the expense of HMRC, who was being forced to accept a 97.7% discount.

However, under Petrofac’s CVA, HMRC would get at least 0.45%, compared with 0.12% in a formal insolvency, and the court concluded that there was no prejudice to HMRC.

Lord Sandison preferred to look at things in the round rather than applying the horizontal or vertical comparators used in the English courts, and said that:

“Unfairness in this context falls to be assessed by asking whether, in all the relevant circumstances, it is equitable to impose the bargain the CVA represents upon an unwilling party.”

One further question Lord Sandison asked was whether an honest and reasonable person in the position of the challenging creditor would hold out against the imposition of the bargain. A common-sense approach.

CVAs should be a good tool, especially for smaller businesses, and it would be positive to see greater numbers, but greater use is unlikely while the existing problems remain unresolved.

Written by Frances Coulson, Partner and Head of Insolvency & Restructuring at Wedlake Bell