When faced with company insolvency and where potential buyers for the business & assets are readily identified, a process known as a pre-pack (or pre-pack administration) can be agreed in principle before a formal insolvency process begins (a pre-pack is a precursor to a company administration). Via a pre-pack, the business can be sold as a going concern.
At its start..
The sale of business and assets will complete almost as soon as the Administrator (an insolvency practitioner) is formally appointed and company administration begins. This allows the value in the business and its assets to be preserved and protected as there will be a continuation of trade.
At its end.
The Administrator will ensure that the best outcome is achieved from the sale of the business and assets to pay creditors with. That outcome may involve the existing director(s) starting a new company with the purchased assets or a third party purchasing the assets to utilise within an existing business. An independent valuation of the assets will be sought during the process.
Pre-Pack Administration Benefits
- With such a short insolvency cycle, the knowledge of financial difficulties is restricted (including to creditors); business confidence remains, as does the business value.
- Intrinsically with a pre-pack, more jobs can be saved and creditor returns can be higher.
- The process will also allow the business to be restructured so that the core business can return back to profitability.
- Finally, the costs associated with a pre-pack can be lower than those associated with a trading administration, as well removing any risks that can be associated with this process.
- 6 benefits of choosing us for your pre-pack administration.
Pre-packs must be actioned by insolvency practitioners (such as ourselves), in accordance with the Statement of Insolvency Practice Number 16 (SIP 16). This ensures transparency, and as soon as a pre-pack completes the insolvency practitioner will circulate all the details of the matter to every creditor.
Briefly, in the interest of transparency, the insolvency practitioner will demonstrate to the creditors that the interests of the company have been put first (before the interests of the director), that they have acted in the best interest of the creditors and that the historical reasoning for decisions is sound. Further, there must be disclosure of the identity of buyers.