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Pre Pack Administration – Help & Advice
The term Pre Pack Administration describes the process where an insolvent company that has gone into administration immediately sells its assets to a third party, before beginning formal insolvency proceedings. The principle of Pre Pack Administrations is to allow the company to realize as much value from the sale of its assets, while at the same time reduce its debt, so it emerges from the process as a much more viable business.
To enable a company to get into a position where it can continue trading, Pre Pack Administrations are sometimes used to help the current management buy the assets of the business, in order to set up a new company that is financially stronger. Pre Pack Administration can also be used to get the best price for a company’s assets before the publicity of formal insolvency proceedings has a negative impact on their value.
Companies who use the Pre Pack Administration process benefit by using the value of their assets to eliminate their current business debt, and emerge from the process as a much more viable business, which is able to carry on trading under new management. Employees are usually transferred to the new company, so they are able to keep their jobs, working for the new business.
Pre Pack Administrations are not always the popular option for dealing with insolvent businesses. As it is the creditors who tend to be the biggest losers, and the least involved, in the whole process, many argue that the Pre Pack Administration process is just a way for companies in debt to continue their business with a clean slate, simply by changing their management. The people that the business owes money to have to simply accept whatever repayment they are offered as a result of the Pre Pack Administration deal.
The reality is, if a company were to continue through the insolvency proceedings, creditors would probably receive a lot less than they would form a Pre Pack Administration process. Insolvency Practitioners are only likely to recommend a Pre Pack Administration if it is the best way of settling the former company’s debts, while still making sure the new management can continue trading, and keep offering people employment.
If your business is in financial trouble, you should consult a professional who is qualified to advise you on how to deal with insolvency and whether a Pre Pack Administration might be the best way to deal with your debt problems. More and more companies are finding Pre Pack Administration the best way to make sure that their business survives, and you need to find out if it’s the right choice for you.
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