Monday, August 13, 2012
The Pre Pack Administration Method
So, what precisely is pre pack administration? Put simply, it involves selling an insolvent business before it being entered into administration. The buyers will often be the previous directors of the business, and the information of the sale are concluded just before an administrator is officially hired. They can do this because they are not actually buying their own old company as such, because it will be a new legal entity by the time the sale goes through. Creditors do not have to be conferred with before pre pack administration is initiated. This is a significant advantage to the company as the move cannot be obstructed, as it could be when they used a company voluntary set up. However , that does not mean that the company can act without any respect to their creditors. They must keep detailed records of the proceedings as later on they may need to give an explanation why pre pack administration was the right solution.
Under this process, the exact information of the sale of the company must be decided upon prior to the business actually being placed in to administration. The administrators will be able to conduct the sale of the business almost immediately. As this process is really a particularly sensitive one, and one which will affect, probably, many other parties, everything must be done transparently and be fully documented. Failure to do so could lead to repercussions later on. A rigid platform is in place to stop individuals abusing the pre pack administration system and it would not have received government backing if it had been a fraudulent way of coping with insolvency. Directors not putting the interests of the company above their own are taking a real risk. Directors found to be abusing the system could be taken to for their actions.
You should make contact with a company specializing in pre pack administrations if you feel it is the best solution for your own company. Practitioners who specialize in pre pack administrations should be able to tell you whether it is advisable for you, and also direct you through the procedure to ensure that you do not breach any of the regulations in place.
For more information, check out: Finance7