What is Pre Pack Administration & Why Would a ‘Pre Packs’ be Good Option
Pre-pack administration how does it work and how can I apply it to my business if I have debts that I want to write off? Who can I turn to for unbiased advice because I know the insolvency practitioners have to look after the interest of the creditors and not the directors.
Pre-pack Administration can save your business by writing off debt and emerging stronger. A ‘Pre-Pack Administration’ (pre-packaged sale) refers to an arrangement under which the sale of all or part of a company’s business or assets is negotiated with a purchaser prior to the appointment of an Insolvency Practitioner as administrator. The sale will be effected by the Insolvency Practitioner shortly after his/her appointment. If you have a company which is not performing as it should be due to large debts which could be from Vat, TAX, carrying to many employees and unable to afford redundancy costs, bank loans and or other creditors pressure.
Why would a ‘Pre-Pack’ be Good For My Business?
‘Pre-pack’ administrations tend to be used where commercial pressures require urgent action, just like the ones described above. The directors might fear of prosecution under wrongful trading and any personal liabilities to the directors. It is at this point the directors should seek the advice of an Insolvency Auditor or an solvency Practitioner to explore all other options including a pre-pack administration.
If the business is viable were it not for the debts or the pressure from the creditors then there is a great chance of the business being sold off as a pre-pack subject to terms and conditions which you will be advised.
New rules, (Statement of Insolvency Practice (SIP) number 16) which were introduced on 1 January 2009, require administrators to explain to creditors the background to their appointment and the reasons why they considered that a ‘pre-pack’ sale would be the best outcome for creditors. Administrators will not only have to reveal the name of the purchaser of the business and the price paid, they will also have to provide details of any connection that the purchaser had with the former directors or shareholders and the price paid.
How will the Insolvency Service deal with misconduct in Pre Pack Administration?
The Insolvency Service works closely with the bodies that regulate administrators to ensure that SIP 16 is put into practice for pre pack administration. They will also be looking to use their enforcement powers to clamp down on any directors who misuse the administration process to disadvantage creditors or seek to gain benefit for themselves. Directors of insolvent companies, which includes those going through pre pack administration, can be disqualified by the court for a period of between 2 to 15 years if their conduct in the period leading to the insolvency proceedings is considered to be unfit.
What are the Options?
If your business is under pressure from creditors of any shape or form you should contact our Insolvency Helpline for a FREE and confidential advice before it becomes to late and your business liabilities become your personal liabilities.