Pre-Pack Administration
A “pre-pack” is a process used by the Directors to recover an insolvent company through the sale & transfer of its assets to a new entity.
Advantages of a pre-pack
- 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 an Insolvency Practitioner subject to Personal Guarantees);
- Avoids disruption to customers & other stakeholders;
- The business may apply to trade under a variation of the original name;
- Rapid resolution with no ongoing supervision.
Change to pre-pack liquidation
Liquidation is now preferred to administration as a definite conclusion to the insolvent company, resolving potential criticism of the process. The sale of assets is subject to both debenture holders discretion & ratification by a creditors’ meeting. In most circumstances this permits business recovery at the benevolence of creditors.
Protection from legal action is almost instant 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.
- An alternative solution keeping the original company is a Company Voluntary Arrangement.
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