A pre-pack Administration is where an insolvent company is placed into administration but instead of the administrator completing a sale after breaking up or trading the company for some time whilst a buyer is found for the business & assets he then sells them immediately upon his appointment. In this instance the business is considered viable so a sale is negotiated beforehand (pre-packaged) and completed upon the administrator’s appointment. Usually the insolvent company ceases to trade and, if a phoenix company is to be set up to act as the purchaser, it starts trading on the day of the administration order as the sale cannot usually be concluded before the Administrator is in control.
A licensed insolvency practitioner like www.bridgenewland.co.uk will be able to meet with you to review your company finances and decide whether an administration is even suitable for your business. The insolvency practitioner should be made aware of the details of any interest which you or any other party has in the business and assets. A value is then instructed to access the value of the business and its assets and these should always be discussed with the intended purchaser. Action is then taken in order to appoint the insolvency practitioner like www.bridgenewland.co.uk as the administrator of the company and this can be by various methods. Before terms are agreed and a sale price is decided the sale agreement is drafted. Administrators are then appointed and the sale is signed off shortly after the appointment of the administrator is confirmed. All creditors are written to and assets are taken control of if there are any that are not included in the sale. The purchaser takes over trading from completion but doesn’t inherit the insolvent company’s debt unless specifically agreed.
A Pre-pack administration is the most well-known procedure due to a lot of media coverage. The process is still governed by the same rules however, a buyer is found prior to the company being placed into administration, with the sale being concluded upon appointment. The purpose of a Pre-pack administration is to ensure continuation of trade by transferring any on-going contracts to the purchasing company (which can be owned by the same directors); and ensuring that the employees are transferred to the purchasing company as part of the sale. This is the usual way an administration is achieved as it is the best way to rescue the business as a going concern.
Certain sections of the media sometimes describe a Pre-pack Administration as a covert or underhand sale back to a company run by the same directors however; any sale during an administration/or Pre-pack Administration is subject to clear regulations, which set out the process to be followed and the information to be provided to company creditors.
Pre-pack administration is most suitable when assets exceed approx. £30,000 and this can include assets. If debtor collections are also likely to be more successful if the customers receive continuity of service it will also be suitable for pre-pack administration.Learn More