The term “pre-pack” is used, in the context of administration, to describe the process through which the sale of the company’s business or assets (or both) are negotiated prior to the appointment of administrators and affected immediately on their appointment.

One of the biggest benefits of initiating a pre-pack sale can be that it allows the business to continue operating, albeit as a new company, safeguarding jobs.
The administrators must be qualified insolvency practitioners.

Often the purchaser in a pre-pack involves some or all of the directors of the company but could be someone who is not involved in the existing business. The assets of the business will have been valued independently in order for the interests of the creditors to be protected.

When to consider Pre-Pack Administration

A pre-pack is an option for the directors of companies with a viable business who have carried out a marketing exercise and have identified a purchaser but, through creditor pressure, face a serious threat of liquidation.

If you are concerned that your company may be insolvent we recommend that you seek professional advice as a matter of urgency. We would be happy to review your situation and advise on the various options available.

Next steps

Prior to the formal appointment an Insolvency Practitioner such as SKSi can be engaged to support the company in the preliminary marketing, professional valuation work and discussions with creditors.

When appointed, the administrators’ will oversee the pre-pack administration, signing off on the sale of the assets as agreed in advance.

The administrators will then assume the same role as they would in a standard administration thereby providing creditors with their proposals which will include the purpose of the administration, details of the company’s financial position and an estimate of the timing and quantum for reviewing claims and making a distribution. Updates will be provided on a 6 monthly basis.

Statement of Insolvency Practice 16 (SIP16) is a mandatory professional standard requiring all insolvency practitioners to provide creditors with an early detailed explanation and justification as to why a pre-pack sale was undertaken.