How The Pre Pack Administration Process Works

So, what exactly is pre pack administration? Put simply, it involves selling an insolvent business prior to it being entered in to administration. The insolvent company can be sold to anyone, but the buyers are often the directors of the company itself. They can do this because they are not actually buying their old company as such, because it will be a new legal entity by the time that the sale goes through. One of the main differences between pre pack administration and other insolvency options is that unsecured creditors do not have to be consulted. This is a major advantage to the company because the move cannot be blocked, as it could be if they used a company voluntary arrangement. However, this does not mean that the company can act without any regard to their creditors. They must keep detailed records of the proceedings as at a later date they may have to give an explanation as to why pre pack administration was the right solution. Under pre pack administration, the exact details of the sale of the business must be decided upon prior to the business actually being placed in to administration. Once in administration, the administrators can process the sale of the business straight away. As this process is a particularly sensitive one, and one which will affect, potentially, many other parties, everything must be done transparently and be fully documented. Failure to do so could lead to repercussions later on. Some people do not agree with pre pack administration on the basis that it appears to allow directors who ran a business irresponsibly to escape being held accountable. They can pretty much continue as they were before, whilst their creditors are left to pick up the tab. However, if pre pack administrations were in any way fraudulent, then they would not have received government backing. Directors not placing the interests of the company above their own are taking a real risk. Directors found to be abusing the system can be taken to for their actions. You should contact a company specializing in pre pack administration if you think it is the best course of action for your own company.

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Originally posted 2010-04-26 05:35:20. Republished by Blog Post Promoter

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