The Benefits of Prepack Administration

When a business is in serious trouble and creditor threats are imminent, it may be necessary to carry out insolvency through the pre-pack administration process. This is a way of selling the company’s assets to a new business (‘newco’) before the appointment of administrators, which can be a great solution to creditor threat problems.

The process begins when an Insolvency prepack administration is hired by a distressed company to assess its financial viability. If they decide that a pre-pack sale is the best option, they will begin to prepare for the procedure by seeking asset valuations and producing a Statement of Affairs.

This statement will include details of the company’s finances and will be issued to creditors as part of the administrator’s proposals. The statements will also have projections that will demonstrate the anticipated return for creditors.

Understanding Prepack Administration: An Overview

In addition to this, an IP will seek to secure finance to fund the purchase of the assets and will contact any floating charge holders who have security on the company’s assets (for example banks). If these are not opposed, the process can proceed. Once this is completed, the administrator will contact the court to get their applications approved and shortly after that the business will be sold.

The benefits of this type of procedure are clear: it helps to preserve value and save jobs. A quick arrangement also means that a lot of the disruption to customers, suppliers and employees can be avoided by ensuring that trade continues largely uninterrupted. It also preserves the value of assets such as goodwill, work in progress and debtors, a fact which improves the return for creditors.

Leave a Reply

Your email address will not be published. Required fields are marked *