Pre-Pack sales can help

21 January 2009



There have been a great deal of recent adverse comments on the use of pre-pack administrations to sell businesses when companies fail. However, the use of a pre-pack administration should not be viewed, necessarily as a bad thing.

Since 1 January 2009, new guidelines have been adopted by the main regulatory bodies who oversee professionals who undertake insolvency work, to improve the transparency of pre-packed administrations. This will help improve the reputation of pre-packs.

It should not be forgotten that the overall duty of an administrator is to act in the interests of the company's creditors as a whole and to avoid unnecessarily harming the interests of creditors as a whole, when selling assets to raise funds to make distributions to secured or preferential creditors.

If a pre-pack is the best way of maximising the return for creditors then that is the path that an administrator should follow.

This can have the added advantage of ensuring a continuing customer for suppliers to the business. Without the quick sale those suppliers could find themselves in financial difficulties themselves.

David Smellie, partner in the corporate and commercial practice comments: "provided that the administrator has considered the options open to him, a pre-pack can be the correct and only way forward. This is particularly true if there are a number of crucial contracts that add value to the business, but could be lost if a full insolvency process followed".

B P Collins' team of experienced corporate and commercial lawyers understand that clients expect pragmatic and commercial solutions. We are committed to building long term relationships that help our clients businesses to grow.

Please contact our corporate and commercial practice group on 01753 279022, complete the online enquiry form or email commercial@bpcollins.co.uk.

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