Why do a Pre-pack Administration?
A pre-pack administration enables a transfer from one business entity to another. It is often the easiest way of preserving the value in a business and maintaining continuity with customers and staff. The Pre-pack terminology makes reference to the fact that the sale of the business is ‘Pre-packaged’ prior to the formal process of an Administration taking place.
What are the benefits of Pre-pack Administration?
What are the timescales for a Pre-pack Administration?
This usually takes a minimum of 2-3 weeks from initial consultation albeit we have completed a process inside 4 days previously. The important considerations concern the marketing and valuation of the business which must take place before a sale occurs. This period of time is also the same when directors buy their own business back through this process.
Who can buy the business back in a Pre-pack Administration and how?
Anyone can buy the business back from the appointed Administrator. It is often the case when dealing with smaller companies, that the director of the company going through the Pre-pack Administration, will purchase the business back.
In other scenarios a third party may wish to acquire a business via a pre-pack whilst the current directors wish to walk away, possibly because they have simply ‘had enough’ or cannot see how the business will work in the future. Alternatively, business owners sometimes wish to walk away but need help to find a buyer – all of this can happen through the pre-pack process and maximise value for all concerned.
The way it is bought back is by simply paying for the business and assets you want – you don’t have to buy them all, but it is often easier if you do. Terms for the sale/purchase will need to be agreed via a contract, but this is all part of the process.
Why do a pre-pack admin rather than liquidate my company?
There are many reasons to favour a pre-pack admin over a liquidation, winding-up or a CVA. It all comes down to your specific circumstances and what you are trying to achieve. One key difference is the timescale of a pre-pack because it is often shorter and doesn’t involve a cessation in trade. Contact us to learn more about the reasons why you may want to use a Pre-pack Administration.
However, if you are running a business that is struggling financially, it can be an invaluable way out of your predicament and put you quickly on the road to recovery, which can also relieve an incredible amount of stress and reduce the risk of personal liability arising from wrongful trading.
I’ve heard some criticism of pre-packs, why?
The main reasons a lot of people believe pre-pack admins are used by directors wishing to do an underhand, confidential deal with the Administrator, whilst others dislike it because it can allow a director to benefit from being able to seamlessly carry on a business whilst leaving all of the debts such HMRC tax or PAYE debts behind.
However, the legislation was created by the government to try to encourage entrepreneurship, rescue business or lead to better outcomes for creditors, but as with any insolvency process there are often creditors who do not get paid as a result.
How do I arrange a Pre-Pack Administration?
As Licensed and Regulated Insolvency Practioner’s, Lucas Ross can provide all the advice and support you would need if you were considering this an option to survive.
Contact us today on 0330 128 9489 to receive free confidential advice on your company’s circumstances and find out more about a Pre-pack Administration.