Pre Pack Administrations


Maintain uninterrupted business without creditor pressure – through Pre Pack Administration

A Pre Pack Administration (‘pre-pack’ or ‘pre-packaged sale’) is a popular choice for directors wishing to continue the existing business within a new company. It facilitates the sale of an insolvent business to either existing directors, a trade buyer or a third party. Within a Pre pack the sale of the business and any assets are negotiated prior to the appointment of administrators.

The speed of the sale in this situation allows for the preservation of asset values, to maintain uninterrupted business and to save jobs. Trade can continue as normal but without creditor pressure and releasing unmanageable debts.


For an honest appraisal of whether a Pre Pack Administration is right for you, talk to professionals for some honest advice

Whilst the ethical nature of Pre Pack Administration is often called into question a prepack can be the right answer. However, it is important to ensure that it is not a case of ‘out of the frying pan and into the fire’ and you need honest professional advice to know if it is right for you. Given the right conditions, the benefits are:

  • Allows for the sale of a business as a ‘going concern’
  • Preserves the values of assets and work in progress
  • The IP pays funds received from liquidated assets to the creditors

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Our approach to a Pre Pack and the alternatives

Alternatives to a Pre Pack

Often directors considering a Pre pack Administration are in a situation where they would not be able to repay their debts regardless and in this situation either Liquidation or Administration are the only alternative options.

Our approach to Pre Pack Administration

We have utilised the Pre Pack process on many occasions as an effective business rescue tool. Our skill is in ensuring that it can be demonstrated to be justified and we have considered and explained all the practical as well the legal implications. If you think a Pre Pack is right for you, talk to us so that you understand the full facts and can make an informed decision, before you go past the point of no return.

We often find that it is not what you do, but how you do it that makes the difference. Our experience in this area can help achieve your aims and keep you out of trouble.


Considerations before advancing with a Pre Packaged Administration

Practical points:

  1. To what extent will you be required to provide personal guarantees to cover any deferred sale consideration?
  2. To what extent will you be required to provide personal guarantees to a new funder of the business?
  3. Will your customers be willing to continue to place orders with you, will they become concerned about the viability of the new company and its ability to fulfil future orders?
  4. Will key suppliers be willing to trade with you, if so, on what terms?
  5. Will you be ‘blacklisted’ in your industry and what will be the consequences?
  6. Will your landlord be willing to assign the lease to the premises to your new company?

Legal considerations:

  1. Despite some of the information being broadcast, particularly on the internet, a director’s first duty in these circumstances is to the creditors. If you act inappropriately, you can suffer significant personal financial and criminal penalties
  2. The Administrator has legal and ethical responsibilities and will have to justify the terms of the sale to creditors
  3. The Administrators conduct can be subject to a liquidator’s inspection and/or challenged by creditors and could result in transactions entered into being overturned and financial and criminal penalties.

Risks of a Pre Pack:

  1. A Pre pack if carried out correctly can be an extremely useful procedure to enable a business to be continued. However, it must be undertaken with consideration to the obligations of both the directors and the Administrator. A failure by either party can lead to significant financial or criminal penalties
  2. Managing the process properly and being seen to be acting correctly, can overcome a lot of potential difficulties. Whilst the pre pack process has become very popular and can appear to be a simple low cost solution to an insolvency, there is a lot of disquiet on the part of government, the insolvency regulators and significant creditor bodies regarding potential abuse. In particular, concern is being expressed regarding the values being attached to assets sold without the market being tested and whether alterative procedures could obtain a better return for creditors.

If you are considering a pre pack administration you are strongly advised to talk to an expert for professional advice, call us now!

Talk to industry leading business recovery experts trusted by UK business for over 30 years. Call us now on 01489 550 440