pre pack insolvency

Pre-Pack Insolvency

Pre Pack Insolvency refers to a deal for the sale of an insolvent company's business and/or assets which is put in place before the company goes into a formal insolvency process (pre pack administration or pre pack liquidation). The deal is usually agreed before the insolvency practitioner is formally appointed and then rapidly executed once the appointment is made.

A pre pack administration has been used for many decades but they have increased in volume following the Enterprise Act of 2002. A pre pack tends to be most useful for owner-managed businesses and those where most of the value in the business is in key staff or assets that may leave or lose considerable value once the administration or liquidation process is announced. Hence, the business is usually sold with little or no open marketing. Unsecured creditors are normally only informed of the pre-pack after it has been completed. By contrast secured creditors are often aware of the transaction ahead of the finalised deal as it will generally require them to release their security

Finance7 are not Insolvency Practitioners, we are qualified accountants who specialise in insolvency, specifically pre pack insolvency i.e pre pack administration and pre pack liquidation. This presents Directors and Shareholders with a significant benefit, unlike an Insolvency Practitioner, we have no statutory duty to represent the best interests of Creditors. This enables the distressed business to receive specialist advice regarding the pending pre pack administration or liquidation without the red tape that often gets in the way when an Insolvency Practitioner is involved

The main advantage of pre pack insolvency is that the debts of the business remain with the old company and therefore the new company (often called a phoenix company) can start again with a clean slate. At the point the sale is agreed the existing company will move into Administration or Liquidation and the new company will start trading immediately. Therefore, with the right advice from us, the whole process will be seamless to the business, the staff and the customers.

In 92 per cent of cases, a pre pack administration will result in all jobs being saved, according to Nottingham University. Pre-packs also provide a better return for secured creditors when compared with their prospects should the company be liquidated.

We will arrange for the funding to be raised for the new company. It is often possible for the assets to be bought back over deferred terms i.e. 10 monthly payments and we will ensure the best price possible is negotiated with the insolvency practitioner on your behalf.

Ultimately, for the pre pack insolvency to go ahead, an Insolvency Practitioner will have to be appointed. However, by this stage we will have already ironed out any potential problems, had the assets valued, and have an agreement in principle in place. Finance7 will then assist you in appointing a commercially aware Insolvency Practitioner. Ultimately the choice of the Insolvency Practitioner will be that of the Directors, however we will always recommend one that we have a good relationship with and that we have worked with before in a pre pack administration. The fact that we will involve an Insolvency Practitioner at the optimal stage ensures that there can be no recrimination on you regarding the price achieved for the business and the assets of the company

We will 'hold your hand' through the whole process in order to ensure it proceeds smoothly and you understand every step that is taken. Please read our testimonials in order to see how we have helped businesses in similar circumstances.