Advantages of a Pre-Pack Administration

Thinking of a Pre-Pack Administration? What Are The Options?

The practice of ‘pre-packaging’ the administration process of failing companies has developed to preserve continuity as well as to give birth to a stronger company. These are the main advantages of a Pre-Pack Administration. Continuity of supply is also retained, keeping customers and suppliers happy. Staff employment is also retained to a greater or lesser extent (certainly this is true of key employees in their role in the new business).

Using this procedure a company is sold shortly after the appointment of the administrator. There are several aspects to be considered in relation to normal procedures, and the advantages of a Pre-Pack Administration include minimizing fallout from the following:

The risk of loss of trade due to disruption of business
Necessities of expensive marketing and a lengthy sales procedure
Priority expenses during the administration (including rent and rates)
Issues relating to employee contracts.

Business turnaround specialists such as ourselves have come to realise the advantages of a Pre-Pack Administration as it reduces the effects of all of the above, and has several more benefits besides, including lower professional fees and the fact that the reputation of the company (and also its credit worthiness) is not going to suffer because of the low-key exposure and almost complete lack of publicity when compared with the glare of a bankruptcy or a liquidation.

Significantly, in September 2007 a High Court Judge ruled in favour of the use of a Pre-Pack Administration in order to save a business and jobs, although this meant going against the wishes major creditors. In this case a claim by HMRC was rejected and the sale was allowed to proceed as intended. The ruling appeared to be largely because the sale was the only way of safeguarding the livelihood of the firm’s employees, among other considerations.

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Benefits of a Pre-Pack Administration

Advantages of a Pre-Pack Administration