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Pre-Pack Administration: Is it an option for your business?

Do you have a viable business that’s facing creditor pressure? If your company has significant liabilities that make insolvency likely, pre-pack administration could be your best way of continuing your business while relieving debt pressures.

Pre-pack administration  is a legal method of selling your company’s assets to a new company in order to continue operating after company administration.


What is a pre-pack administration sale?

Pre-Pack Administration allows your company to sell many of its assets to a third party when it faces threats such as demand notices from creditors.

While liquidation results in the end of the company and the sale of its assets in order to repay creditors, a pre-pack administration sale allows the company to transfer many of its assets to a new company in order to continue trading, albeit as a different business.

This allows the company to preserve jobs and continue operating as it formerly did – with debts cleared. To purchase assets during a pre-pack administration sale, the former company’s directors needs to raise funds.

Pre-pack administration allows for continuation so it’s the preferred option when compared to liquidation or company administration.


What are the benefits?

Entering into a pre-pack administration deal has a wide range of benefits, particularly for directors and employees of the former company:

  • The pre-pack sale allows you to keep operating, albeit with a new company
  • Company directors can purchase the old company’s assets, including equipment, clients, contracts and property. The assets can then be transferred to the new company in order to continue operating
  • Companys directors can transfer existing employees to their new business, preventing job losses
  • Significantly less of an interruption to the company’s normal operations


Can your company use a pre-pack asset sale?

Starting a pre-pack administration arrangement isn’t suitable for every business. However, if your company has a viable business model and needs to seamlessly continue operating in order to save jobs, a pre-pack asset sale could be the best option for you.

Building a company is hard work, and being forced to liquidate valuable equipment, property and connections due to insolvency is something that few business owners enjoy. Because of this, Pre-Pack Administration deals are popular with company directors.

What are the requirements?

In order for a pre-pack administration arrangement to be facilitated by an insolvency practitioner, your business needs to meet several requirements.

  • Your business needs to be insolvent – its debts need to exceed the value of its assets and/or a statutory payment demand made by a creditor on a debt of £750 or more has been ignored.
  • It must have no serious chance of recovery.
  • The third party purchasing your company’s existing assets must be able to purchase the assets at a fair market price using its own funds.

Pre-Pack Administration Process

Understanding pre-pack laws and regulations

If your company is insolvent, it’s essential that you act in the best interests of your creditors. Your first course of action when you believe that your company might be insolvent should be to contact a licensed insolvency practitioner immediately.

Companies involved in pre-packaged administration are subject to the Transfer of Undertakings (Protection of Employment) regulations. TUPE protects employees in the event of a pre-packaged asset sale and must be complied with.

Contact us to learn more about how pre-pack could help you

If you have a viable business that’s become burdened by debt and contracts that are no longer working in its interest, pre-packaged administration could be the optimal choice for relieving creditor pressure and continuing operations.

We can offer detailed, personalised assistance to help your business make the right decision when facing creditor pressure or insolvency. Contact us today to discuss whether pre-pack administration is right for you.

Contact us today for FREE to learn more about how we can help you and your business.

We have a team of advisers who have helped hundreds of businesses around the UK that have faced financial pressures on every scale. You are not alone.

Call us free and in confidence on 0800 599 9656 and together we will sort things out.