Can a Pre-Pack Administration Help Your Business?
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Nowadays businesses are facing huge problems with the recent economic downturn and increasingly more and more company owners are looking at a pre-pack administration as the solution to a growing set of problems.
A pre-pack administration is a legal process whereby a business is sold on wholesale or in part to a third party, who could be the existing directors, with the bad parts taken from it and the functional parts remaining. This is a powerful and perfectly legal way of transferring the best parts of the company to the new company, sometimes called a phoenix company, as it rises from the ashes of the old, failing business.
A business which is in this situation will likely face one of a number of issues which impact upon it both legally and financially. These may include problems with the landlord, HMRC, suppliers and credit sources such as the company’s own bank. PAYE and VAT may also be a matter which is causing concern and the business may find that it cannot meet its monthly invoices from many sources. The company may have grown flabby with a nasty synthesis of too large a workforce and a falling market. It may also be that existing obligations are killing the business, or that there are necessities legally which it is becoming arduous to satisfy.
Directors of the company may feel compromised by the potential threat of wrongful trading which is hanging over them as the situation gets worse. Also, of course, there is the matter of individual risk, if any of the directors have undertaken personal guarantees or if individual properties are tied up with the business. Here the legal implications can be serious. It is such a situation that a pre-pack administration looks like an good option.
On taking advice from a licensed Insolvency Practitioner a comprehensive report needs to be prepared and a copy sent to the company directors and possibly also to the bank. In the report options will be discussed including possible new sources of finance, a company voluntary arrangement (or CVA) and even a creditors liquidation, in addition to a pre-pack administration. A meeting of directors and shareholders should then be held to decide which option to take, and how this should be conducted. More details on what is needed may be found at the http://www.pre-pack-administration.cvlhelp.co.uk site.
Once things have been decided it should be the Insolvency Practitioner who oversees the marketing of the company (under the guidelines known as SIPS). There are several compliance issues which need to be adhered to in any pre pack administration and that is one of those. Another is that the sale of the business must be advertised, so that unless you retain the right advisor working for your interests, you may find that the going concern will fall into a competitor’s hands!
For good impartial advice see the Pre-Pack Administration web site.
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Posted on: Saturday, December 26, 2009 at 2:42 pm 
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