What is the difference between administration, liquidation and a CVA?

What do the three words actually mean?

Administration, liquidation and CVA often get used as if they were one idea said three ways. They are three separate legal procedures with different purposes, and the difference matters most to the director who has to choose between them.

The Insolvency Service's director information hub on insolvency starts with the test itself. Your company is insolvent when it cannot pay its debts on time or has more liabilities than assets on its balance sheet. The same page says this does not always mean the company must stop trading, and it lists a CVA and administration among the options for a company that is able to continue. Liquidation is the option for a company that cannot.

So the first question is not which procedure to use. It is whether the business underneath the debt has a future worth protecting.

What is a company voluntary arrangement?

A CVA is an agreement between the company and its creditors. GOV.UK's page on company voluntary arrangements says an insolvent company can use one to pay creditors over a fixed period, and that if creditors agree, the company can continue trading. The Insolvency Service's guide to options when a company is insolvent describes it as a binding agreement for payment of all, or part of, the company's debts over an agreed period.

You can only get a CVA through an insolvency practitioner, and they will charge to apply for it and to administer it. The practitioner works out an arrangement covering the amount of debt the company can pay and a payment schedule, and must do this within a month of being appointed. Creditors then vote, and the CVA is approved if 75% (by debt value) of the creditors who vote agree.

From then on, the company makes the scheduled payments through the insolvency practitioner. The guidance is plain about the risk. If the company does not meet the agreed payment schedule, any of its creditors can apply to wind it up.

What is administration?

Administration goes further. GOV.UK's guide to putting a company into administration says you must hand over control of your company and everything it owns to the administrator, and that the administrator's fees are paid by the company. The Insolvency Service guide confirms the administrator is an insolvency practitioner.

The protection is the reason companies use it. During administration the company is protected from legal action by creditors, and nobody can apply to wind it up. The administrator has 8 weeks to write a statement explaining what they plan to do, and must invite creditors, employees and Companies House to approve or amend the plans. For as long as the company is in administration, the administrator runs the business, and can cancel or renegotiate contracts or make employees redundant.

The plan can take several forms. The guide lists negotiating a CVA so the company can keep trading, selling the business as a going concern to another company, selling the assets as part of a creditors' voluntary liquidation, or closing the company if there is nothing to sell. Administration ends when the administrator decides its purpose has been achieved, or when the appointment ends, which happens automatically after a year unless it is renewed.

What is liquidation?

Liquidation closes the company. GOV.UK's guide to liquidating your limited company says the company will stop doing business and employing people, and that its assets are used to pay off its debts, with any money left going to shareholders.

There are three types. A creditors' voluntary liquidation is for a company that cannot pay its debts, where the directors involve the creditors. A compulsory liquidation goes through the courts, and the Insolvency Service guide says creditors can also apply to wind up an insolvent company this way. A members' voluntary liquidation is for a company that can pay its debts but whose owners want to close it.

In every type, the liquidator is an authorised insolvency practitioner or official receiver, and takes control of the business as soon as they are appointed. Their work includes selling the company's assets, paying creditors, and interviewing the directors to report on what went wrong in the business. In a creditors' voluntary liquidation, the liquidator acts in the interest of the creditors, not the directors.

How do the three compare?

	CVA	Administration	Liquidation
What it is for	Paying creditors over a fixed period while the company trades	Trying to stop the company being wound up, or paying as much of its debts as possible	Closing the company and using its assets to pay its debts
Does trading continue?	Yes, if creditors agree	The administrator runs the business while it lasts	No, the company stops doing business
How it is agreed	75% by debt value of the creditors who vote	Creditors are invited to approve or amend the administrator's plans	Depends on the type: through creditors, the court or the members
Who runs it	An insolvency practitioner	An insolvency practitioner	An insolvency practitioner or the official receiver
The main risk	Missed payments can lead to a winding up application	The company can still be wound up	The company will not exist once removed from the register

Is administration always the end of the business?

No, although the word sounds final. The administration guide says the administrator will try to stop the company being wound up. One of the outcomes it lists is selling the business as a going concern, meaning the business can carry on, for example by keeping its clients, workforce or orders.

It can also go the other way. GOV.UK says administration can mean the company does not have to pay all its debts in full, but the company can still be wound up. Administration buys protection and time for a decision. It does not decide the outcome in advance.

A second misunderstanding is that a CVA is a quick way to cut debt. It needs creditor approval, it costs money to set up and run, and missed payments put the company back at risk of being wound up. GOV.UK also says that unless three quarters of those who vote approve the CVA, the company could face voluntary liquidation.

A third is that liquidation lets directors simply walk away. The liquidator interviews the directors and reports on what went wrong. Our post on director duties when a company is struggling explains why the decisions made before that point matter.

What do the official figures show?

The Insolvency Service publishes monthly company insolvency statistics. The Insolvency Service recorded 1,882 company insolvencies in England and Wales in September 2026. They consisted of 341 compulsory liquidations, 1,420 creditors' voluntary liquidations, 102 administrations and 19 company voluntary arrangements. Liquidation, mostly the voluntary kind, accounts for nearly all of them.

The figures count companies that have entered formal insolvency procedures. An informal agreement with creditors is not one, so it never appears in these tables. The commentary also notes that administration numbers have been volatile in recent months, driven by over 250 connected companies in the Real Estate sector entering administration between March and August 2026. One month's figure can say more about a single group of companies than about the economy as a whole.

What should you weigh before choosing a procedure?

Start with whether the company is insolvent on the test the guidance uses. If it is not, a formal procedure may not be needed. The insolvency hub lists contacting your creditors to discuss an informal agreement over unpaid bills as one option, a formal restructuring plan as another, and a moratorium as a third, which gives struggling businesses formal breathing space to explore rescue and restructuring options, free from creditor action.

Then look hard at whether the business can make money once the old debt is dealt with. A CVA, or a rescue through administration, depends on that answer. If the honest answer is no, liquidation may be the cleaner choice.

Ask each adviser what the procedure will cost, who pays, and who will control the company while it runs. Ask what happens to staff, contracts and any personal guarantee you have signed. Our post on checking a personal guarantee covers that last point in more detail.

When is this not the answer?

This post explains the terms. It cannot tell you which procedure suits your company, and nothing here should be read as advice on your own position. That decision needs a licensed insolvency practitioner, and GOV.UK has a service to find an insolvency practitioner in your area. Vanquish Capital is not an insolvency practitioner and cannot take a formal appointment. If a debt is disputed, you need a solicitor, and if the question is about the accounts themselves, an accountant.

The rules also differ across the UK. GOV.UK says there is a different process to liquidate a limited company in Scotland or wind up a company in Northern Ireland, so a company registered there should take advice from someone who works under those rules.

If the company can pay its debts and you simply want to stop trading, an insolvency procedure may not be relevant at all. Our post on striking off a limited company looks at when that is the simpler choice, and a members' voluntary liquidation exists for solvent companies that need a formal close.

Where can Vanquish help?

A first meeting with an insolvency practitioner goes further when the figures, the creditor list and your questions are already in order. That is practical work we can do with you, alongside the regulated advice you need, through our business recovery and director strategy support.

If you would like to talk it through privately first, you can book a confidential consultation.