Updated: 2nd November 2020
Pre pack administration is a formal insolvency process that allows for the purchase of an insolvent company’s assets. The procedure must be carried out by a licensed insolvency practitioner (IP) appointed as administrator, but this appointment only takes place at a certain stage of proceedings to facilitate a quick sale.
This speed of sale helps to preserve asset values, save jobs, and maintain commercial momentum via largely uninterrupted customer service and continuation of supplier contracts. The assets are transferred to a new company, or ‘newco,’ and trade continues without the stress of unmanageable debt and creditor pressure.
Businesses need to be valued before a reliable quote can be provided for pre pack administration, however, so it’s important to take care when seeking insolvency help. Real Business Rescue are licensed insolvency practitioners with extensive experience. We can offer dependable unbiased advice on pre pack administration, and help you decide whether this is the best route for your business.
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The pre pack administration process is subject to strict legislation, and the office-holder must be able to prove it offers the best result for creditors. Other eligibility criteria include, but are not limited to:
The Transfer of Undertakings (Protection of Employment) regulations, or TUPE, protect employee contracts during the transfer to a new company. There are strict requirements for directors acting under this legislation, both as an employer of the old and the new company.
Although jobs are often preserved with a pre pack some redundancies may be necessary and it’s how you deal with these that is crucial, ensuring you comply with TUPE regulations to avoid claims of unfair dismissal by employees.
Our insolvency practitioners have vast experience of dealing with pre pack processes and TUPE regulations. We can advise on how to remain compliant and avoid the heavy fines imposed for failing in this respect.
Pre pack administration has been the subject of controversy in the past because, taking a purely objective view, it can appear that directors of the failed company have simply purchased the assets of their business and moved on to a new enterprise without adequately dealing with debt.
The administrator is a key figure in the process, however, and they have a legal duty to the creditors. They are obliged to demonstrate that pre pack offers the best returns for the company’s creditors, and it is this professional assessment that helps to reduce the mistrust that sometimes surrounds the procedure.
Confusion can arise over exactly what is for sale in a pre pack administration. Essentially, the old limited company is closed down at the end of the process, and it’s the business assets that are sold.
Although it may seem like the same company is trading - the staff, suppliers, and customers haven’t changed - trade is taking place under an entirely new company with a different name.
If you need help determining whether a pre-packaged administration could be the solution to your insolvency problems, or if you have any questions at all feel free to email us or call us on 0800 644 6080.
If you'd like to learn more visit our pre-pack administration FAQs or download our free pre-pack guide.