A Pre-Pack Administration (‘’Pre Pack’’) is a legal mechanism that allows the business to be seamlessly preserved whilst providing a better return for creditors generally.
Pre-Pack occurs where the business is marketed and a sale is agreed prior to the company entering into administration. Whilst the business will be available for sale to independent third parties, typically it is of the greatest value to its existing directors and the majority of pre-pack sales are to the incumbent management team.
How does it work?
The first step is to file a notice in Court to provide protection from creditors by way of an interim moratorium. Whilst this protection is in place it allows you some breathing space to take appropriate advice and speak to the professional advice that you need.
The Company’s business and assets will then be professionally valued by an independent surveyor and a market value agrees with the purchaser.
If the Insolvency Practitioner is satisfied that the agreed value represents the best possible outcome for creditors then the company will enter administration and the sale will be concluded.
Provides protection from creditors
Allows uninterrupted continuation of the business
Provides best possible outcome for creditors
New business free from historical debt
Sale can be on deferred terms
Company must be insolvent
The process must result in a beneficial outcome for creditors than if the Company were wound up (Liquidation)