UK restructuring: is the CVA staging a comeback?

CVAs and restructuring plans are both restructuring tools which allow companies in financial difficulties to restructure and reorganise their financial obligations through compromise arrangements with their creditors to rescue the company as a going concern.

In recent years, the number of CVAs has dropped for various reasons, including the partial return of Crown preference over tax debt. At the same time, the number of plans has steadily increased.  

However, due to an increase in litigation, the growing costs and uncertainty over a new court practice statement in relation to plans coupled with a potential appeal to the Supreme Court, practitioners and companies in financial difficulty should re-consider a CVA as an option. 

What are the options?

CVAs 

The CVA was introduced by the Insolvency Act in 1986 as a quick, flexible and cost-effective way for a company to restructure without needing to incur the time and cost of going to court unless the CVA is challenged. Creditors vote to accept or reject a CVA and, if approved by the required majority, the CVA takes effect.

However, a CVA cannot bind secured or preferential creditors without their agreement. There is a 28-day period during which creditors can challenge an approved CVA, creating a lack of certainty until that time period has passed. If the challenge cannot be settled, there is a risk of protracted litigation, and the CVA is in “limbo”.

The number of CVAs has been declining since 2019. In the late 2010s the particularly high level of CVAs was largely driven by the retail and casual dining sectors. Companies faced growing pressure from high street challenges, growing overheads and lease pressures, with several well-known high street names entering so called “landlord only” CVAs, put forward by retailers as a method of reducing rental costs. Many of these ‘landlord only’ CVAs failed, resulting in the subsequent administration of many retailers and casual dining businesses, as they failed to deal with underlying structural issues and provided only a short term ‘sticking plaster’ solution. Several CVAs were also challenged, such as the CVAs proposed by Debenhams and Regis, leading to uncertainty in this area.

The Covid-19 pandemic brought CVAs with a wider scope than before, with companies recognising the need to compromise more than just rental liabilities. However, the reintroduction of Crown preference in December 2020 meant agreement would need to be reached with HMRC or all tax liabilities repaid in full before a CVA could be approved - something that was unachievable for many companies, meaning that administration or liquidation became the only option. 

Restructuring plans

Restructuring plans were introduced by the Corporate Insolvency and Governance Act 2020 as part of a package of measures in response to the impact of Covid lockdowns. They are a flexible, comprehensive restructuring tool that have mainly been used for large complex restructurings, but can, and have also been used in the mid-market.

Plans are based on Companies Act schemes of arrangement and require court approval with at least two hearings - convening and sanctioning - being mandatory.

Unlike a CVA, a plan can bind secured and preferential creditors as well as dissenting classes of creditors through the cross-class cram-down mechanism, provided that those creditors are no worse off than in the “relevant alternative”). Given the involvement of the court, the main disadvantage of a plan, particularly compared to a CVA, is that it is more expensive and time-consuming. This is exacerbated by the fact that any objecting creditors can join in the court process, with the company potentially bearing their costs.

The number of plans is steadily increasing, and with that there is a growing amount of case law developing. While over time the case law should settle and help to dictate best practice for proposing a plan, at the moment plans are becoming increasingly litigious and creditors are challenging them on issues such as the correct relevant alternative, valuation evidence, adequate disclosure and fairness.  

Three cases have been taken to the Court of Appeal involving Alder, Thames Water and Petrofac. Permission to appeal the High Court’s decision to not sanction the Waldorf Production plan has been granted by the Supreme Court, after Waldorf was granted a ‘leapfrog’ certificate allowing it to bypass the Court of Appeal. The issue which the Supreme Court is being asked to consider relates to the treatment of the out-of-the-money creditors and the extent to which the benefits preserved or generated by a plan – the so-called “restructuring surplus" – need  to be fairly allocated. The High Court refused to sanction a restructuring plan for Waldorf Production on the basis that the Thames Water and Petrofac decisions required it to give weight to the views of the out-of-the-money creditors and Waldorf had failed to engage in any discussions with two dissenting out-of-the-money creditors. Until there is clarification on this issue, it is likely that restructuring professionals will be wary of proposing a plan and the more tried and tested CVA route may, therefore, appear to be more favourable.

It is apparent from the increased litigation that, when proposing a plan, the company must now anticipate and provide for a potential challenge. Not only does a challenge create uncertainty, but it extends the length of the restructuring which may be a delay that a company in financial difficulties cannot afford to suffer. Additionally, a contested plan leads to an increase in costs. It was reported that the costs for the Thames Water plan were a staggering £15million per month.

Since its inception, costs have been the main obstacle preventing small and medium sized companies from proposing a plan. There has been some debate about potentially introducing a so-called ‘restructuring plan lite’ for SMEs which would only involve one court hearing, making it cheaper. It was also hoped that evolving case law on plans would increase certainty and lead to predictability, which would help to reduce costs. However, this does not appear to have happened yet.

Given the significant costs associated with a plan, it is increasingly becoming a less viable option for many companies, especially SMEs, and they may now reconsider using the cheaper alternative of a CVA.

Is a CVA a more viable restructuring option?

The HMRC challenge

HMRC is often a significant creditor, particularly in the SME market. As stated above, HMRC cannot be bound by a CVA unless it specifically consents, whereas it can be bound by a plan if the court imposes cross-class cram-down. This does, at first glance, make plans look more attractive.

In its guidance relating to CVAs, which was updated in October 2025, HMRC stated that it expects all its secondary preferential liability to be cleared in full prior to any distribution to unsecured creditors, and will not support a proposal where this is not the case. 

HMRC’s position in relation to plans is similar. In guidance issued in November 2023, HMRC said that it will not support plans where other creditors are paid whilst HMRC is not unless the differential treatment can be justified. Until recently, HMRC voted against the majority of plans. While the courts have shown that they are willing to cram-down, as seen with the Prezzo restructuring plan, they have also made clear they will exercise caution and will not cram-down HMRC without good reason.

The court has refused to cram-down HMRC on more than one occasion – for example, in the Nasmyth and Great Annual Savings cases. Although HMRC’s stance in relation to plans appears to have changed recently, with it appearing at the sanction hearings of both the Enzen plan and the Outside Clinic plan to actively support them, this was only after it had negotiated a better position than initially offered.

Therefore, while it might appear easier to bind HMRC by utilising the cram-down power available in a plan, in practice the position is not so different when dealing with them regardless of whether a plan or CVA is proposed. In both cases, the proposing company will need to negotiate with HMRC early in the process to secure their support.

A new plan of action

In response to the number of contested plans and the consequent demands on court time, the civil court practice statement (4-page / 230KB PDF) relating to restructuring plans was recently updated.

The new practice statement will come into effect on 1 January 2026, bringing with it several changes intended to improve transparency and ensure a level playing field for all stakeholders. The changes are intended to reduce costs and efficiently allocate court resources, shortening timeframes and creating more predictability in the process. However, they also represent a major shift from current practice, meaning both practitioners and courts will need to adapt to the new process.

The new approach will require more early-stage planning and intensive work from the outset, particularly around identifying potential issues and engagement with stakeholders. The concern is that this will potentially result in more time and upfront costs. As a result, many companies may adopt a wait-and-see approach until the process has been tested by others – or look for an alternative, such as a CVA.

The main changes include:

• A claim form must now be issued before a hearing date can be obtained. This replaces the informal approach where the plan company “pencilled in” a date with the court before they were ready to issue the claim form. While this seeks to promote transparency, there are concerns about information being in the public domain much earlier. Almost all plan cases to date have been issued in the Royal Courts of Justice, where the courts will only list one scheme of arrangement or plan case each day – resulting in as much as a nine-month weight for hearing dates, which has a significant knock-on to potential rescues, particularly in the SME sector. Applying for additional identification restrictions will have additional cost implications and is not guaranteed to succeed. Irrespective of whether the court file is public, filing the claim form will be an event of default under most finance documents and some other contracts and does not create a moratorium on enforcement. This change therefore has the potential to scupper the restructuring before it has got off the ground.
• The plan company will now need to file a listing note. This is a new requirement to help with court management, setting out time estimates for the case, including appeals and any factors needed for urgent attention. The plan company will also need to notify the court of any material changes. It is currently unclear who will have access to this document, which is expected to be for internal court use only, or how onerous and expensive it will be to create and maintain. There are concerns that, in identifying aspects that could lead to dispute, the plan company would be empowering creditors to raise challenges.
• Evidence in support of the plan must now be filed at least 14 days before the convening hearing. A departure from the current practice of filing a few days before, it remains to be seen how the court will deal with this in urgent matters. The final form of the proposed explanatory statement should be included with the evidence filed before the convening hearing. Again, this could be challenging in practice, as the terms of the plan and, therefore, the content of the explanatory statement, may be evolving right up until the time of the convening hearing - especially as the plan company will now be obliged to consult widely and substantively.
• The court will have increased case management powers, including being able to give directions limiting the issues, the service of and use of expert evidence, orders for disclosure and costs. It is anticipated that this will lead to more case management conferences, which again will lead to an increase in delay and costs.

What this means for businesses

Given the question marks surrounding how this new practice statement will work in reality, the fact that it may increase the already substantial costs of currently proposing a restructuring plan means there are strong arguments in favour of utilising the more straightforward and tried and tested CVA route.

While CVAs fell out of fashion because they were becoming too litigious, the same now appears to be true for plans. Therefore, we may see CVA numbers increase in the near future as case law in this area seems more settled.