Pre Pack Administration – Advice From An Expert

Pre pack administration essentially means to arrange the sale of an insolvent company that has no way of avoiding administration. The buyers of the insolvent company are normally the directors of the actual company that is being sold. This may initially seem like a strange transaction, but bear in mind that they are buying not buying their old business as such, but rather their old business in the form of a new legal entity. Creditors do not have to be consulted before a pre pack administration is initiated. When a business enters administration, a company voluntary arrangement or a liquidation process, creditors must be informed and they can vote to reject proposals, which they cannot do with pre pack administration. However, this does not mean that the company can act without any regard to their creditors. They must keep detailed records of the proceedings as at a later date they may have to give an explanation as to why pre pack administration was the right solution. Under pre pack administration, the exact details of the sale of the business must be decided upon prior to the business actually being placed in to administration. The administrators are able to conduct the sale of the business almost immediately. As this process is a particularly sensitive one, and one which will affect, potentially, many other parties, everything must be done transparently and be fully documented. Failure to do so could lead to repercussions later on. Some people do not agree with pre pack administration on the basis that it appears to allow directors who ran a business irresponsibly to escape being held accountable. It may seem that they can just close down the insolvent company, continue trading as before but under a new name, and leave their creditors with unpaid debts. That is a simplistic view though, and a framework is in place to ensure that the system of pre pack administration is not abused. Directors not placing the interests of the company above their own are taking a real risk. If creditors, on finding out about the pre pack administration taking place, feel that the directors acted with only their personal interests in mind, then they can take legal action against them.. You should contact a company specializing in pre pack administration if you think it is the best course of action for your own company.

Find Out More – Business Bankruptcy

Be Sociable, Share!

•