Updated: 5th February 2020
If your company is facing serious financial problems and you’re wondering whether a pre-pack administration procedure might represent a viable route forward then you could benefit from our video below. The video below explains the basics of how a pre-pack administration process works and details the key pros and cons involved.
It’s likely that you’ll have heard of the phrase ‘Administration’, particularly with the number of high-profile administrations we’ve seen in recent years on the High Street and with dozens of professional football clubs.
In this short video, we’ll explain the basics of administration, where a pre-packaged sale might come into play, and the pros and cons of administration as a business rescue solution.
Administration is essentially a powerful restructuring tool that helps struggling but potentially viable companies. If your company is in debt and being pressured by creditors, or, for example, is being threatened with legal action – maybe even a winding up petition – seeking the protection of administration could halt any action being taken against the business.
Although administration and pre-pack administration are governed by the same best practice requirements, the pre-pack process differs in one key area – the sale of the business and any assets of the company is negotiated before the appointment of administrators and completes either immediately upon – or shortly following – the appointment. This differs from the standard process where administrators commence marketing of the business after their appointment.
The key plus-points of administration are the continuation of trade by transferring any existing business to a newly set-up company, and the migration of employees to the new company as part of the sale – thus preserving jobs.
Another advantage of administration can be that less professional fees are incurred as the administrators are not responsible for trading the business.
In conclusion, the administration process is a powerful and useful tool as long as the conditions are right. It is subject to clear preferential guidelines and we, as licensed insolvency practitioners, would have to ensure that it would be the best solution to take for all parties involved.