Pre pack administration is a rescue tool used to purchase the business and assets of a struggling company, before it enters into administration. It allows for the quick sale and a seamless transfer of the purchased assets, allowing for business and trade to continue largely uninterrupted. It helps preserve asset values, saves jobs and can maintain commercial momentum via largely uninterrupted customer service and continuation of supplier contracts.

The process involves the insolvency practitioner helping to plan and carry out an accelerated sale process, with offers being sought for the company before the insolvency appointment. This is a key part of the process to help maximise realisations for the company’s creditors.

Deciphering Pre-Pack Administration: What You Need to Know

Once a suitable offer is received the insolvency practitioner will complete an asset valuation and produce a Statement of Affairs, which will be included within the administrator’s proposal to creditors, indicating their proposals for the future of the business. They will also consider the impact of the sale on employee rights, with TUPE regulations transferring employees’ contracts to the new company.

Once they have met their compliance obligations and raised any finance required to fund the acquisition, a contract will be drawn up that formally appoints the insolvency practitioner as the administrator and they will commence the pre-pack process by contacting floating charge holders (banks or lenders who hold security) to ensure there are no objections. Upon approval, they will then submit their applications to court. Once approved, the business will then be sold to a newco or a third party.