Starting the process
Starting the process of pre-pack begins with the conclusion that a business is insolvent.
A decision must then be reached as to whether elements of the business are still viable and likely to be attractive to a purchaser, be that a third party or a newly formed company.
If a pre-pack sale is considered the most appropriate solution a decision as to who is going to purchase the business will have to be made.
A full, accurate and independent assessment of how much the company is worth will be carried out and a confidential marketing process may be required.
At all times the focus is on maximising realisations for the benefit of creditors.
The pre-pack process can be summarised as:
- Appoint a licensed insolvency practitioner to act as administrator
- Undertake a formal valuation of company assets
- Arrange for the insolvency practitioner to negotiate the sale of company assets and draw up legally binding contracts.
- Sell the assets to the new company or third party effective on the company entering administration.
- Convene a creditors meeting setting out the Administration proposals, detailing the reasons for the pre-pack sale and why it was in the best interests of creditors.
Remember a pre-pack has to be managed by a licensed insolvency practitioner and follow strict legal guidelines.