What is a Pre-Pack Administration?
A Pre-Pack Administration or ‘Pre-Pack’ is a procedure to deal with the closure of your company if the company is insolvent – or in other words the value of the assets of the company are not enough to be able to clear all of the debts.
A Pre-Pack Administration is really exactly the same procedure as for an Administration. The only difference is that there is a purchaser for the company and all the terms of the sale have been agreed so that the sale can be completed as soon as the Administrator has been appointed.
When is Pre-Pack Administration the Right Choice?
This procedure is to be used (rather than a Creditors’ Voluntary Liquidation or Company Voluntary Arrangement) 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 to an entirely independent purchaser through a management buyout or an MBO, or to the existing directors or shareholders.
Pre Pack Administration Process
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 purchaser and administrator, and we will need to liaise with the company bankers.
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We’re going to arrange for these things to be done as quickly as possible, as time in these circumstances is often scarce, and we usually take about ten 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.
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As part of our work, we will speak to your bankers, the 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 expertise or experience 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 the same date and complete the sale.
The proposals to creditors need to be drafted by the administrator and sent to creditors within eight weeks of the appointment. No meeting of creditors is required unless specifically requested by the creditors, which is unusual.
Proving It’s the Right Choice for Companies in Administration
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 the creditors than any other insolvency process.