Pre-Pack Administration

Pre-pack administration is a type of insolvency procedure that allows an insolvent company to sell its assets to a buyer before appointing administrators. This can be done quickly and confidentially, which can help to protect the value of the business and preserve jobs.

The pre-pack administration process typically begins with the company’s directors approaching an insolvency practitioner (IP) to discuss the possibility of a sale. The IP will then market the business to potential buyers and, if a suitable buyer is found, the sale will be negotiated and agreed in advance of the appointment of administrators.

Once the administrators are appointed, they will oversee the sale of the business and ensure that the sale proceeds are distributed to the company’s creditors. The pre-pack administration process can be a complex and time-consuming process, but it can be a valuable tool for businesses that are facing financial difficulties.

Benefits of pre-pack administration:

  • Speed: Pre-pack administration can be a much quicker process than other insolvency procedures, such as liquidation. This is because the sale of the business has already been negotiated and agreed in advance of the appointment of administrators.
  • Confidentiality: The pre-pack administration process can be kept confidential, which can help to protect the value of the business and preserve jobs.
  • Preservation of value: Pre-pack administration can help to preserve the value of the business by selling it to a buyer who is willing to pay a good price. This can benefit both the company’s creditors and its employees.

Potential drawbacks to pre-pack administration:

  • Lack of transparency: The pre-pack administration process can be opaque, which can make it difficult for creditors to understand how the sale of the business was negotiated and agreed.
  • Potential for abuse: Pre-pack administration can be abused by directors who use it to sell their business to a connected party at a knock-down price.

Overall, pre-pack administration can be a valuable tool for businesses that are facing financial difficulties. However, it is important to be aware of the potential drawbacks of this procedure before entering into it.