Tuesday, August 21, 2012

Company Pre Pack Administration - A Helpful Guide

In the present economic climate, pre pack administration is becoming an significantly common choice for struggling businesses. Many organisations in the united kingdom are turning to it as a solution to overwhelming debt problems. What is pre pack administration and how can it benefit a company?

What exactly is Pre Pack Administration?

Pre-pack admin is actually a procedure in which the resources of a business are sold prior to its forced into a formal insolvency procedure. It allows a business to be sold with no creditor's approval, thereby protecting the business from creditor attack in the procedure. The assets and also day to day trading in the business can be bought by a new company who can still trade without the burden of the debts incurred by the previous business.

When is the best used?

Prepack administration is quite useful when there are instant threats to the viability of a business from its lenders. A common circumstance wherein pre-pack administration is ideal is when a business is carrying debt that it can no longer afford to service but the core business might still be viable. In this case the owners of the existing business form a new company which then buys the actual assets of the old company yet leaves behind the debts.

What are its benefits?

For a deteriorating business it can be beneficial for a number of reasons. With the sale of business assets being agreed in advance it allows the company to carry on free from debt. Where appropriate it releases the company from contracts and leases that could no longer be needed however can also existing connections with suppliers to be continued. In the some cases this may also guarantee a higher return to creditors than would otherwise be the case. In situations where the business is being bought by the previous owners it maintains jobs for directors and employees. It can also help avoid disruption to customers.

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