CVA Case Study: finding the right path when the options are complex

When a company with over £1 million in contracted orders and a potentially valuable subsidiary shareholding faced an imminent cash flow crisis, a carefully considered Company Voluntary Arrangement (CVA) offered a route that protected creditors, preserved a significant Research and Development tax relief claim, and avoided the losses that a fire-sale liquidation would have caused.

The situation

Even Keel Solutions was first approached in Spring 2025 by the directors of a Hampshire based company experiencing cash flow difficulties. Several meetings took place during the course of that year, and on each occasion, though the concerns were real, circumstances resolved sufficiently for the company to keep trading with the expectation of better conditions ahead.

By early 2026, the position had changed materially. The company held a strong order book, with contracts valued in excess of £1 million, but clients were deferring their production requests. As a result, the company was unlikely to be able to meet its cash flow requirements within the next one to two months.

The directors faced a difficult early decision: the full wage bill could not be met beyond the end of the month, and the majority of staff had to be made redundant. A small number were retained to ensure a smooth process and to protect institutional knowledge within the business.

What made this situation particularly complex was the company’s asset position. It held a significant shareholding in a subsidiary that had recently moved from the research and development phase into income generation. That shareholding was conservatively valued in excess of £1 million, with the realistic prospect of being worth considerably more.

What we did

Working through the options required careful analysis rather than a quick decision, because no single route was straightforwardly right.

An MVL (Members’ Voluntary Liquidation) was considered first, given the value of the shares. It became apparent, however, that there was insufficient certainty to support that route, particularly once the potential tax liability arising on the disposal of the subsidiary’s shares was factored in.

Administration and an insolvent liquidation (CVL) were both considered and had genuine merit. The problem with both was a sizeable Research and Development tax relief claim that could not be pursued in an insolvent scenario, and which also required the company to continue trading to qualify. Writing that off was not a decision to take lightly.

There was a further complication. The company was part-way through a grant-funded research project that still had funding to be received. Completing it mattered, both for the value it would protect and for the obligations attached to the grant.

A CVA offered a way through. Under this arrangement, the company could continue trading at a reduced capacity, complete the research project, retain access to the R&D tax relief claim, and allow time to identify interested parties for the disposal of the subsidiary shareholding through a considered process rather than a forced sale.

The landlords’ co-operation was essential to making this work. With their agreement for the company and its subsidiary to remain at the premises for a further six months, the CVA became a realistic and achievable outcome.

The outcome

The final outcome remains in process, but the position is encouraging. The subsidiary’s trading performance has continued to strengthen, and the prospect of a full return to creditors (100p in the pound) is a genuine possibility. Beyond that, the company may retain some of the remaining shares, which represents future value for its shareholders.

The contrast with the alternatives is clear. An insolvent liquidation would have required the liquidators to oversee asset disposals and carry out statutory investigations, at cost to the estate. It would also have extinguished the R&D claim and forced a share disposal in circumstances that would have depressed the price. The MVL was not available without a declaration that the directors could definitely repay creditors in full within 12 months, which was not a position they could honestly take. The CVA preserved what needed to be preserved and gave creditors a realistic prospect of full recovery.

It took time to identify the right solution which was time was well spent.

Expertise when the situation does not fit a standard template

This case illustrates why early engagement with an insolvency practitioner matters, and why the right advice requires more than familiarity with the available procedures. The outcome here depended on understanding the interaction between insolvency law, R&D tax relief rules, grant funding obligations, and the impact on asset values by using different procedures.
When a company is approaching financial difficulty, the range of options narrows as pressure builds. Engaging early, even when the situation feels uncertain or the picture is still forming, gives directors the clearest possible view of what is achievable and the best chance of reaching an outcome that protects creditors, preserves value, and reflects the specific circumstances of the business.

For more information about Company Voluntary Arrangements, corporate insolvency, or advice for directors facing financial pressure, contact Even Keel Solutions.