Pre-Pack Administration Rules Approved
Is This A Way Forward for You ?
Rules for 'pre-pack' administrations (where a company goes into administration with the prospective purchaser already in place and the sale of the business is pre-arranged) have been given the thumbs-up by insolvency practitioners.
The main advantage of a pre-pack is that the company in difficulty can continue to trade without interruption. It is argued that this allows the best price to be realised for the company. It is also argued that it allows the administrator to avoid many expenses that would normally be incurred during the period in which a buyer is sought, thereby reducing the risk to other creditors of receiving a smaller dividend. In addition, pre-packs are claimed to reduce the likelihood that the business will be put into liquidation.
However, pre-packs have a number of opponents, including HM Revenue and Customs (HMRC), which often face a shortfall in VAT, Corporation Tax and/or PAYE when a company enters administration. HMRC have opposed a number of pre-packs in court, with varying success. A more recent alleged tactic involves the denial of VAT Registration Numbers to companies engaged in setting up a pre-pack.
The rule book will go some way to ensuring that pre-packs are dealt with in a consistent and ethical way.
IF THE PRE PACK MAY BE THE WAY FORWARD FOR YOUR BUSINESS CALL US NOW - IT IS NEVER TOO EARLY
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Tony Forster Head of Company Commercial
Martino Burgess Associate
Natasha Bliss Associate
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The above notes are intended as guidance to Companies and their directors who can see real dangers ahead. Every situation is different and directors are advised to take professional advice as early as possible. Whilst we hope these guidance notes are helpful they are not a substitute for such advice and are offered free of charge and without liability on our part.