Blog
Pre Packs abuse of creditors or genuine business rescue?
Posted 9th March 2012 | 0 comments
Pre Packs – abuse of creditors or genuine business rescue?
When a company is facing financial collapse the decision to sell as a going concern should only be made with one purpose in mind – to maximise the realistic value of the assets.
The term ‘Pre-Pack’ Administration has become widely used and it is often wrongly assumed that, in a pre pack, the company’s assets or business are sold prior to a formal insolvency process. The term actually refers to an arrangement where the sale of all or part of a company’s assets is negotiated with a purchaser prior to the appointment of an Administrator.
Once appointed, the Administrator then implements the sale either immediately on or shortly after formal appointment. The sale is made to a third party or a connected party.
The main advantage of a sale via a pre-pack arrangement in Administration is that a business can be sold on before its own insolvency devalues and destroys the business and this advantage will be lost if the sale process is delayed leaving the closure of the business and liquidation as potentially the only option.
As far as The Business Rescue Service is concerned a Pre Pack is a legitimate form of business rescue.
