What is a Pre-pack Administration? How can this help you?
A Pre-pack Administration or pre-pack is a procedure to deal with the closure of your company if the company is insolvent – in other words, there are not enough company assets which can be sold or realised, to pay off all the debts of the company.
A pre-pack Administration is really exactly the same procedure as for an Administration. The only thing that is different is that a purchaser has been identified and all the terms of the sale have been agreed so that the sale can be completed as soon as the Administrator is appointed.
A pre-pack Admin procedure is to be used (rather than a CVL or a CVA) if there is part or all of the business that can be sold or is worth trying to salvage. Of course, this is something that we will carefully review with you to make sure the right process is chosen to deal with your company.
This procedure may facilitate a sale of the business;
• either to an entirely independent purchaser,
• through a Management Buy Out (or MBO) or
• to the existing directors or shareholders.
Prior to the appointment of the Administrator and the sale of the business we will need
• an independent valuation of the business or assets that are being sold
• a sale and purchase agreement to be agreed by the proposed Administrator and purchaser
• to liaise with the company bankers.
We will arrange for these things to be done as quickly as possible, as time in these circumstances is often scarce. It will usually take about 10 days to two weeks from your initial meeting with us to the sale of the business taking place, providing decisions are made. The sale and purchase agreement will usually be drafted by our solicitors and agreed with solicitors acting for the purchaser.
As part of our work we will speak to your bankers, tax authorities and any major supplier to explain the plan in more detail and get their support. These are delicate negotiations and not all Insolvency Practitioners have the experience or expertise to do this.
At an early stage in the process we will agree a completion date for the sale, and providing all the paperwork is in order, the Administrator will be appointed on that day and complete the sale.
The proposals to creditors need to be drafted by the Administrator and sent to creditors within 8 weeks of the appointment. No meeting of creditors is required unless specifically requested by the creditors, which is unusual.
For a pre-pack Administration to take place the Administrator must be able to demonstrate that the Pre-pack route will have a better outcome for creditors other than any other insolvency process.