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What is Pre-Pack Administration?
A pre-pack administration is when the business is sold by the administrator to management or a third-party purchaser either immediately upon their appointment or within a few days.
It is a useful tool when the type of business means that ongoing marketing by an administrator may damage its goodwill and value, with the pre-pack administration process providing a discrete and swift transfer of ownership, allowing the company to enjoy a new start. Here at the Insolvency Experts, we are experienced in guiding clients through the range of pre-pack administration rules that allow them to utilise this financial solution.
What are the advantages of pre-pack administration?
One of the main advantages of this administration is the permanency of the “business”, as the business is protected by the courts, giving the administrator the power to sell the business and all of its assets. It writes off the debts of the existing company with no interruption to the trading business.
There are several benefits to the pre-pack administration process, including the meeting of contractual obligations as the newco will often carry on trading as it did before the administration. Jobs are often saved as a result and as it is sold as a going concern, it can result in greater returns for creditors.
If the newco turns out to be the previous directors of the business then it may often generate negative publicity, as it is often frowned upon, despite it being a legal arrangement. It’s important to remember that other options may include liquidation, whereby employees may lose jobs and the business does not continue trading, so any type of administration that allows the company to continue has its benefits.
How does the pre-pack administration process begin?
During a pre-pack administration, we would seek a valuation of the assets and negotiate a sale prior to the appointment of the administrator. Upon being appointed as administrators, the business would be sold to the existing directors as a going concern. This option often allows the business to continue trading without too much disruption, and importantly, usually without the loss of trade or jobs. We can guide on how this process could be carried out for your company with all of the relevant pre-pack administration rules adhered to.
What are the key pre-pack administration rules and requirements?
As you would expect, there are several requirements and conditions which need to be met before a pre-pack administration process could be carried out. As insolvency practitioners, we must be able to demonstrate that the pre-pack administration was the right thing to do, and we must report this to the official body.
Within this report, we must prove that we assessed every other option, but that the pre-pack administration offered the best return for creditors. This is done to ensure that the process was done for the right reasons, in order to remove any fears that it was unethical.
How do I select the right expert for the pre-pack administration process?
You’ll want to select an Insolvency Practitioner who can expertly advise you on exactly how to approach your pre-pack administration process. Here at The Insolvency Experts, we are experienced in pre-pack administrations and can advise you on which course is right for your business – contact us today if you believe this may be appropriate for you. For more information, email us on firstname.lastname@example.org or call us on 0300 303 8284.
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