If your company has entered insolvency or creditors are threatening legal action to recover their debts, pre-pack administration may be a suitable solution. It is an official insolvency procedure whereby underlying assets are sold quickly, prior to appointing an administrator to oversee the process.
This video explains how pre-pack administration works, and the conditions that must be met before the procedure can be adopted.
A key element of pre-pack administration is that the administrator works in the best interests of your company’s creditors as well as the company, and supporting proof is required that this has been the case.
The underlying assets of a business can be sold on to a third party or trade buyer via pre-pack administration. It is also possible for the existing directors of the insolvent company to purchase the assets with personal funds and set up a ‘newco.’
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Other procedures should also be considered by the appointed insolvency practitioner and if pre-pack is decided upon, all your company’s assets must be professionally valued before sale.
This video also explains the advantages of pre-pack administration for the different parties involved. It means the company can operate without the burden of heavy debt, maintain trading relationships with suppliers, whilst complying with the stringent UK laws surrounding the procedure.
Measures are in place to prevent abuse of this process, including the requirement for proof that the purchasing entity will be viable regardless of whether the assets are sold to an existing company or a newco.
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