Advantages of a Pre-Pack
When an agreement is reached to sell business assets effective from when a company enters administration this is referred to as a Pre-Pack.
The primary advantage is the ability of the purchaser to complete a sale without any interruption to trading. This not only maximises value for the creditors in the administration it can also result in the transfer and continuation of on-going contracts with customers and suppliers. The Pre-Pack sale may also involve the transfer of staff contracts saving jobs as a result.
There is also the opportunity for connected parties of the existing company (directors/shareholders) to purchase the business assets under the terms of a Pre-Pack sale.
A sale to connected parties may further maximise value as their familiarity with the business could enhance the prospect of continuity of trading.
Any Pre-Pack process is independently assessed and subject to regulatory safeguards to which the Administrator must adhere. There must be genuine reasons why the company should be rescued via this process in particular to achieve a better realisation for creditors.
There are advantages associated with Pre-Pack Administration but it may not be the right option for your business.