Pre-Pack Creditors’ Voluntary Liquidation
Pre-pack CVLs are a commonly used product utilised by Insolvency Practitioners. They replace pre-pack administration to resolve potential criticism of the process from creditors. This procedure could also be considered as an option if a CVA is rejected by the creditors.
Pre-Packaging a CVL
At the discretion of debenture holders a reasonable value for its assets is negotiated with an Insolvency Practitioner prior to appointment. The asset sale is subject to ratification at a creditors’ meeting; in most circumstances permitting a new company to buy back the assets at the benevolence of creditors. Protection from creditors is quickly achieved with a final resolution in less than 4 weeks. During this time continuity is achieved by a license to operate issued to the new company.
Advantages of a pre-pack CVL
- Preserves jobs for Directors & employees offering a higher potential return for secured creditors;
- Achieves a write-off of company debt (not subject to Personal Guarantees);
- Releases the business from onerous leases or contracts (as they remain with the old company to be dealt with by the Insolvency Practitioner subject to Personal Guarantees);
- The business may apply to trade under a variation of the original name;
- Avoids disruption to customers & other stakeholders;
- Rapid resolution with no ongoing supervision.
An alternative solution; Company Voluntary Arrangement may also resolve insolvency whilst keeping the original company.
- Find out more about, Company Voluntary Arrangements.