Pre-Pack Reforms

The Government has recently announced that new reforms are to be made in respect of pre-packaged sale agreements in Administrations, which are often called “Pre-Packs”.

Currently, where a pre-packaged sale to a connected party is proposed, the matter can be reviewed by an independent body, called the Pre-Pack Pool. The process is quick and relatively inexpensive at £950 plus VAT.

This independent review is voluntary however Insolvency Practitioners are required to encourage a connected and/or associated buyer to approach the Pre-Pack Pool for their comments as to the appropriateness of the proposed sale.

The issue of course is that it is voluntary and quite often connected buyers do not ask the Pre-Pack Pool to carry out an independent review.

The proposed changes that will make an approach to the Pre-Pack Pool mandatory is welcome news in my view as Pre-Packs are a very useful tool for maximising realisations, saving jobs and rescuing the underlying business.

I have always encouraged connected parties to use the Pre-Pack Pool, as it increases transparency and stakeholder confidence.  With the need to prepare viability statements it also forces the potential buyer to think about what changes need to be made to make the business a success, i.e. what lessons have been learnt from the past, which in turn, should result in the new business going forward being better equipped to succeed.

Whilst there may be some in the industry who take the view that this is another piece of regulation which adds to an already highly regulated procedure; provided that the review process remains as streamlined and as quick as it has been in the past and the costs involved do not increase, then in my view, this proposed reform should be welcomed.

More information on Administrations and Pre-Packs can be found on our website by clicking these links.

If you wish to discuss Pre-Packs, Administration or any other insolvency matter, please do not hesitate to contact me on 01326 340579 or at chris@purnells.co.uk