- This is a form of Company Administration which enables an “off market” sale of the company’s business and assets
- It allows continuity of trade by seamlessly transferring assets into the new company
- The speed of a pre-pack Administration is one of the main advantages to the process
What is a Pre-pack Administration?
A Pre-Packaged Administration (often shortened to ‘Pre-Pack’) is a form of Company Administration which enables an insolvent company to sell the assets and trade of the company ‘off-market’ to new owners with a deal that has been agreed before the company enters into Administration with the first role of the administrators being to sign off on the sale agreement.
The sale could be to a third party or, if the insolvent company is considered to have a viable future, to current directors, providing independent valuations are met. The deal is completed as soon as the Insolvency Practitioner is appointed to manage the Administration process.
The pre-pack has attracted adverse publicity over the past few years and as such many pre-pack deals agreed prior to the formal Administration of the company will have been openly marketed before the company enters formal administration. This method can be achieved without attracting undue adverse publicity. Usually in a case where there would not have been sufficient funding available to run the company under the management of Administrators while a buyer was researched. The costs of trading a company under Administration can be huge.
Hence a sale agreed before the appointment of an Administrator which has been openly marketed can be workable in certain circumstances.
A Pre-Pack offers a number of attractive advantages:
- It allows continuity of trade, by legally and seamlessly transferring assets and the good parts of the insolvent business into a new company
- It minimises the impact of insolvency from the original company
- It can be arranged very quickly
- It limits the potentially damaging impact of publicity
- It reduces the costs of Company Administration, which can be significant
Is a Pre-Pack Deal Marketed?
A true pre-pack is known as an off-market deal.
No marketing will take place after the official Administrator (a licensed insolvency practitioner) is appointed.
Pre-administration, the question of marketing will depend on whether the Pre-Pack sale relates to existing managers or owners of the insolvent company, or a new third party. In general now, it is difficult to see too many circumstances where a business would not need to be openly marketed before a pre-pack deal was put in place.
How can FA Simms & Partners Help?
When you seek the advice and help of FA Simms & Partners you have the reassurance of knowing that your case will be handled sensitively by professional, authorised and regulated insolvency practice with 36 years’ experience of helping SMEs work through their debt and insolvency difficulties.