Pre Pack has been very much the phrase of the moment over the last few years amongst struggling businesses. Despite this increased awareness of the term, very few people actually seem to understand what Pre Pack Administration really is and what it can be used for.

A Pre Pack is actually a specific form of Administration where a sale of the business and assets is agreed with the proposed Administrator prior to his appointment. The sale of the business is essentially pre-packaged (hence the name).

How A Pre Pack Works

As with any Administration, the return to creditors must be better in the Pre Pack than it would be if the Company were simply to be liquidated instead. Where a Pre Pack achieves this is through obtaining a better price for the business and assets by ensuring it continues seamlessly with no disruption to customers or staff.

Pre Pack Administration has the following benefits:

• Provides the same immediate protection from creditors as Administration;
• Ensures you know the cost and outcome before the Company formally enters Administration;
• Allows the business to continue seamlessly without disruption to customers or staff;
• Keeps you more in control of the sale process;
• Can be completely extremely quickly.

In the vast majority of Companies, the business and assets are worth more to the existing directors than to anyone else due to the directors having knowledge of the business and relationships with its customers. As a result, a Pre Pack sale to a new entity run by the same directors (known as a Phoenix company) can not only provide the best outcome for creditors but just as importantly can allow you to continue in business after an insolvency. Moreover, because the sale is agreed in advance of the Company going into Administration you know exactly what you will have to pay and what the outcome will be.

A Pre Pack typically takes between 1 and 4 weeks to complete from initial discussions to formal sale of assets to the purchasing company. The exact amount of time taken depends on the level of creditor pressure you are under and the complexity of your business structure.

The cost of a Pre Pack is based on the value of the assets to be purchased. This value is determined by valuation agents who specialise in valuing assets in insolvency processes. If the asset value is considerable, it will usually be possible to agree payment over a deferred period provided the return to creditors is preserved.

Our Service

When you contact us, you will always speak directly to a licensed Insolvency Practitioner who will discuss your Company's financial position with you . We will also take the time to understand how you are looking to restructure your business and what ultimate outcome you are hoping for.

Based on this, we will advise you on whether Pre Pack Administration is the best course of action and if so, the steps required to make it happen. Due to the complex nature of a Pre Pack and the short time frame in which they are agreed and completed, we will always arrange to meet with you at your premises and will guide you through every step in detail. We will also endeavour to provide you with details of time frame and costs as soon as possible so that you are fully aware of what to expect.

As with all business turnaround procedures, the sooner you act the more options you will have and the easier it will be to formulate a viable recovery plan as the Company will be under less pressure and distress. To discuss Administration further or to find out how Administration could work for your business, call us free on 0800 066 3122