What are pre-pack administrations?
Pre-pack administration offers a lifeline to companies that are struggling, but it is vital that you don’t waste any time if you wish to take advantage of the benefits this insolvency option can bring.
It involves the sale of your company to a third party in order to stave off the threat of a winding-up petition.
The sale enables the business to be relieved of its debts and unwanted contracts, and some pre-pack administrations involve staff and management changes.
What is involved?
The process of a pre-pack administration sale involves firstly appointing insolvency practitioners to examine the circumstances of your business and prepare a report that is then shared with the board of directors.
The report should explore all potential insolvency procedures available to the company, and give explanations as to why a pre-pack sale was selected over other insolvency routes - it is subject to strict rules and measures (pdf), to which practitioners must adhere.
Your company’s directors will be required to come to a decision over whether or not they wish to proceed with the pre-pack sale, and if they do then a buyer will need to be identified.
Corporate insolvency law requires that insolvency practitioners market the business to potential buyers. If there is no interest in buying the business, then it can be sold to a selected third party, to existing directors of the company, or to a newly formed company.
