Creditor Pressure
If your company has escalating debts and creditors are chasing you for payment that your company cannot afford, there is little time to waste.
A Pre-Pack Administration is a mechanism used to sell the business and assets of an insolvent company. The assets are usually sold under a pre arranged sale whilst the business is preserved and migrated to a new Company. This is agreed with the Administrator (Licensed Insolvency Practitioner) prior to his/her appointment.
The new company may be controlled by the existing Directors or a new set of owners who wish to purchase the assets of the old company. The return to the company’s creditors must be greater than what would simply be achieved in a Liquidation of the company. To satisfy this, the assets and business are purchased at market value that is determined by an independent professional valuation company.
Once the company’s assets have an agreed sale and price, the company then enters Administration so that the sale can take place. This process ensures that the business can continue without major disruption to the staff or suppliers of the company and usually a quick sale limits disruption to trade. It's not unusual for the assets to be purchased over a deferred period with an agreed repayment schedule.
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With most companies, the assets of the business hold greater value to the existing directors. Usually a Pre-Pack sale to a new company operated by the existing Directors not only provides the best outcome for the creditors of the old company but it allows the preservation of the business allowing it to continue after insolvency.
Assets that are not sold as part of a Pre-Pack Administration process are usually disposed of by other means and the old company is then closed down. All monies realised are then used to make repayments to the company’s creditors on a pro rata basis after the costs and expenses of the Administration have been deducted. As a sale is pre arranged, the Directors have full transparency of what they are required to pay as well as the outcome of the procedure.
Most creditors believe that a Pre-Pack Administration only serves to benefit the new company in allowing it to continue trading, whilst leaving its debts behind in the old company. However, this is not the case and the use of a Pre-Pack Administration is often a practical and powerful tool in providing a better return to creditors whilst preserving key aspects of a business.
It usually takes between 1 and 4 weeks from initial engagement with the directors of a company to a formal sale of the company’s assets to the new company. This process length is determined by the complexity of your business.
Clark Oliver are able to assist in providing an efficient service and advice if you believe your Company to be insolvent and we can determine whether a Pre-Pack Administration is the right solution for you if you feel you may still have a viable business.
Please contact us to arrange a free initial consultation in the strictest of confidence.