If your business is insolvent but certain parts of the business are still valuable, you may wish to enter the business into pre-pack administration.
Pre-pack administration is an insolvency procedure in which assets from an insolvent company are sold to a new company as the insolvent company enters into administration. This allows the company’s jobs, asset values and commercial relationships to be preserved.
By selling assets on to a new company quickly, business operations can continue with minimal disruption and the new company can operate without such significant debt.
The pre-pack administration process can be complicated, and pre-pack administration isn’t the best option for every business. However, if your business is insolvent and you want to continue with a new company, it may be a good solution for you.
As specialists in insolvency, we can assist with every aspect of pre-pack administration for your business. For more information, please continue reading below or contact us now to talk to our team.
Pre-pack administration is an insolvency procedure. Typically, an insolvent business enters into administration and its assets are marketed and sold by a licensed insolvency practitioner acting as the administrator.
In a pre-pack administration, a third party — typically a new company controlled by an existing director — will negotiate to purchase the insolvent business’s assets before the company starts the administration process.
Following the sale of the business’s assets, the funds generated are used to repay the insolvent business’s creditors.
Pre-pack administration has several advantages, both for creditors and for company directors that wish to continue operating the business. However, it also has several disadvantages that you should be aware of before considering this insolvency procedure.
Not all businesses can make use of the pre-pack administration process. In order to be eligible for a pre-pack administration, your business needs to be:
During any insolvency procedure, the aim is to provide the best financial result for the insolvent business’s creditors. Pre-pack administration is no different — during the sale of assets, it needs to be clear that a pre-pack administration is in the creditors’ best interests.
Pre-pack administration has a range of advantages over other insolvency procedures, both for company directors and creditors:
Pre-pack administration can also have certain disadvantages. Like the advantages of pre-pack administration, these can affect both company directors and creditors:
Pre-pack administration has a range of unique advantages, but it’s not always the best option for every business. If your business has limited assets, for example, a pre-pack administration likely isn’t the best choice for ensuring creditors receive the best financial results.
If your business is insolvent but viable, pre-pack administration may be a needlessly costly and complex solution when an alternative like a company voluntary arrangement (CVA) is a suitable option for repaying its creditors. Other alternatives to pre-pack administration include:
If your business is insolvent and under pressure from its creditors, it’s important that you cease trading and seek expert help as soon as possible.
Our licensed insolvency practitioners have helped hundreds of UK businesses in a wide range of industries successfully use insolvency procedures, including pre-pack administration. If your business is under pressure, we can provide personalised, expert advice and assistance.
If pre-pack administration is a suitable option for your business, our insolvency practitioners can complete the entire process to ensure the best outcome for company directors and creditors.
To discuss your business’s situation and learn more about what you can do, contact us now on 0800 9717185 or send us an email to schedule your free private consultation.
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