Yes. In a pre-packaged administration sale existing directors or shareholders may purchase the business and assets of the old company (“OldCo”) by forming a new company which is often referred to as the ‘Newco’. Such a sale of all or part of the company’s business and assets is negotiated and agreed before the formal appointment of the Administrator.
In more detail
Unlike other insolvency procedures where an administrator or liquidator takes full control, a pre-pack administration affords the directors more involvement in the sale of the business and assets and provides an opportunity to buy the business back intact before customers, suppliers and employees even hear that administrators have been appointed.
Pre-packs can be a useful tool to preserve value in a potentially viable business, help retains employment and provide a swift and better outcome for creditors.
When might a pre-pack be appropriate?
- When time is of the essence to maintain business continuity
- When the core value of the business might dissipate otherwise
- If there is a danger of losing key staff or harming client relationships through uncertainty
However, pre-pack administrations have over the years got a bad name with creditors be suspicious of cosy deals. In response the Government and insolvency regulators have piled on requirements for pre-packs to be more transparent and when the sale is back to OldCo’s former management for it must be scrutinised by an independent Evaluator. The insolvency practitioner is expected to openly market the business and assets to allow third parties or trade buyers to participate in the sale process of assets should they wish. Pre-packs are amongst the most difficult work that insolvency practitioners do.
What next? If you would like advice around pre-packs or administration call our experts today who can help find you the best solution. Call us on 0800 254 5494