A pre-pack administration occurs when a company sells its business and assets immediately upon the appointment of administrators.
Why use a pre-pack approach?
A company in distress may have a core business that is worth preserving as a going concern. However, public knowledge that the company is in financial distress, and particularly if it is already in an insolvency process, may severely limit the ability of the company to find buyers for its business, because suppliers may withhold supplies and customers may look elsewhere and key employees may leave to find new jobs.
How is the sale arranged?
Following a carefully supervised marketing and sales process, typically involving specialist agents, the business will be sold, maximising value and preserving as may jobs as possible. This happens immediately upon being placed into administration.
What happens after the sale?
The administrator will then deal with the proceeds from the sale, and there may still be other assets to deal with before a distribution can be made to creditors.
Are there extra costs involved?
The costs of a pre-pack sale can be significant because of the need for ongoing advice for directors to ensure that they are acting in the best interest of creditors throughout the sales process.
