Pre Pack Administration – Advice From An Expert

Insolvent companies who sell their assets to a third party as soon as they go into administration, are said to be the subject of a Pre Pack Administration. This process tries to ensure the business can continue to operate under the new management, and the money raised from the sale of the assets can be used to settle as much of the previous company’s outstanding debts as possible.

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.

Using the Pre Pack Administration process to place a company in the hands of new management means that, in most cases, the company can become financially viable again. The proceeds from the sale of the company’s assets are used to settle the debts owed to the former business’s creditors. The new company usually retains all the employees of the old business, who do the same job as they were doing before, it’s simply the management of the company that has changed.

Many creditors are unhappy about the use of Pre Pack Administrations because they have very little involvement in making sure they get the best possible settlement from any deal. The fact that the creditors will be the ones to lose money, as the company simply wipes out its debts and carries on trading under different management, means Pre Pack Administrations are not popular with everyone. Whatever sale is agreed during the Pre Pack Administration will decide what creditors receive, and they simply have to accept this.

However, many Pre Pack Administrations are arranged with the knowledge and assistance of Insolvency Practitioners, and are actually designed to get as much value for the creditors as possible, while also ensuring the continuity of the business. If the company simply went through the formal insolvency process, a number of factors could mean the creditors would actually be worse off.

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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