Written by: Keith Tully
Published: 20th June 2014
A long-awaited Government Commission charged with reviewing how pre-pack administrations are handled in the UK has called for greater scrutiny of the insolvency procedure.
According to the in-depth review, which was commissioned 12 months ago by business secretary Vince Cable, more must be done to ensure that pre-arranged acquisitions of insolvent businesses by "connected parties" are fair to creditors and customers.
Pre-pack deals have long been deemed controversial by some – particularly creditors who do not always recover their losses and believe the process favours the indebted business – and now their calls for greater transparency have been answered.
The Commission was led by businesswoman Teresa Graham CBE who has announced plans for a 'pre-pack pool' where future administrations can be scrutinised by an independent panel before being given the green light to proceed.
In the report, Graham said: “My review of pre-pack administrations over the last year shows that they have a unique place in the insolvency market.
“However there must be major changes in the way they are administered. I believe my proposals, implemented as a complete package, will lead to real improvements in pre-packs. I hope the insolvency industry, as well as all those in business, will embrace these measures as it is in everyone’s interest that they are successful. I believe they will lead to real improvements in transparency and scrutiny.”
"When these types of business sales are carried out properly, they allow the viable parts of the business to continue operating and jobs are saved," said Jenny Willott, the business minister. "But it is also important for those who are owed money to know they are getting the best possible deal in the circumstances."
"Teresa Graham has come up with a set of recommendations which will ensure people get back as much money as possible and make pre-pack deals more transparent. We will be working with business and industry to implement these recommendations in full and we believe it will help restore trust and confidence in pre-pack deals. We will monitor progress closely and will take the power to legislate if necessary," she said.