What is a Pre-Pack Administration?
Pre-Pack Administration can be a useful process to assist an insolvent business. It occurswhen an agreement is reached to sell company assets which is effective as soon as the company enters administration.
This can ensure elements of the business are preserved and it continues to trade with the minimum of disruption. The purchaser can either be a new company set up by the directors or a third party.
The Advantages of Prepack Administration
Aside from being able to continue trading, the company will be protected by the court whilst the process of transferring ownership of the company/assets takes place.
Pre Pack administration can be used as a way to solve problems that may be holding a business back or impacting on its long term future. These include unwanted contracts or even in some cases may facilitate renegotiation of terms with staff.
A purchaser would also have the opportunity to purchase assets without any interruption to the business and so maximising value.
These can then be transferred to a new company and may include staff contracts, thus saving jobs. Continuation of on-going contracts can also occur.
Points to remember about Prepack Administration
- The assets of the business must be independently valued by an administrator
- The Business/assets must be purchased for a fair price (assessed by the administrator and independent agents as appropriate)
- The new company or third party must have enough funds to purchase the business and/or its assets.
Why Choose Prepack Administration?
Often elements of a business are still viable in whole or in part and the cause of company debt problems can be rectified via this restructuring process, maximising realisations over a close down and “break up” scenario..
In any event creditors must be satisfied that the prepack process adheres to strict legal guidelines.