“Can You Explain What a Pre-Pack Administration is as We are Unclear About What Solution this offers us?”

A ‘pre-pack’ can refer to a pre-pack administration and the solution involves having a future buyer lined up to purchase the more profitable parts of the business. This process is not designed to allow directors to negate their creditor obligations simply because company debts are liquidated along with the company – quite the reverse. The process can in many cases provide a better return for creditors than a simple creditors’ voluntary liquidation and that is the aim. Pre-packs have received somewhat of a mixed press due to creditor anger at directors often buying the company and or assets often at an undervalue, but even the government’s insolvency service acknowledges that in 82% of cases – employees’ jobs are saved, helping with employment figures within the UK. So Pre-Packs can work as long as the rules are followed.

Pre pack administration Rules to Note

  • The business must be appropriately marketed to obtain the best return for creditors;
  • The directors cannot trade with the same company trading name without the permission of creditors and, or the appropriate court;
  • The business assets must be valued by an appropriate valuing agent or chartered surveyor;
  • The creditors interests must be deemed to have been a priority prior to the liquidation.

If you have revenue producing contracts that your company is committed to, company assets and/or properties, but they are under threat from serious litigation, winding up petition; or angry creditors; a pre pack can provide an excellent solution for your situation.

Key advantages:

  • Continuity – a pre-pack can provide a fast, effective way to sell the assets to a potential buyer with minimum disruption to the business.
  • The buyer can acquire the assets, contracts, etc. without having to take on the debts.
  • It can provide an ideal opportunity to restructure the company in whole, from employees to contracts.
  • It can sometimes help stop legal action as creditors have a chance of a better return given that the pre-pack costs are lower.

To find out more about pre-packs you can speak with one of the team on 08000 746 757; or use our Live Support feature at the bottom of the page.

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