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Pre Packed Administrations – An overview
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Pre-pack administration is a formal insolvency procedure that enables the quick sale of a struggling business as a going concern.
In this process, the sale of the business is agreed prior to the administrators formally being appointed. While the buyer can be a third party, it is not uncommon for the existing director/directors to operate under another limited company.
While pre-packed administration aims to preserve the value of the business, assets, jobs, and work in progress, it’s not always favoured by creditors. Some perceive it as directors retaining assets without fulfilling creditors obligations.
For Creditors, pre-packed administration presents a mixed picture. While it offers a swift resolution, some may feel excluded from the process and have limited opportunities to contest it.
Once a decision is made to pursue a pre- pack, an insolvency practitioner will assess the company’s asset’s value and ensure the buyer has the necessary funds. The business is then put up for sale, with creditors being paid from the proceeds.
Despite controversy, pre-packed administration can be a lifeline for struggling construction businesses. However, it’s imperative for all involved parties to adhere to regulations and maintain transparency to ensure fairness.
A “going concern” denotes a business assumed to meet its financial obligations without imminent liquidation. It typically refers to a foreseeable future period, usually at least the next 12 months or the specified accounting period.
