Sunday, September 9, 2012
The Relevance Of Pre Pack Administration
pre pack administration is drawn from the intention of the company's top management to salvage the company from collapse. The company can be struggling with business liabilities and manage to rise on its feet and start moving again if the procedure for pre pack can be carried out accordingly. This is where the company directors choose to form a different company as a brand new separate entity. The old company transfers all its useful assets to the new company as a means of disposing all of them. When this process is completed, the directors file the notice of dissolution. Through this way, the company is wound up.
There are several reasons why the option of pre pack is taken. These includes the truth that the company is strained by business debts that it can not meet. In this instance, the business is actually faced with serious threat of collapsing. This is as a means of giving the company the new beginning and also the new face with regards to liquidity. All of the assets are acquired by the new company while the obligation remains with the old business. This gives the new business the strength to operate in the market with no hassle from prior creditors.
Pre pack administration can be conducted when the directors can prove these conditions. The company must be under threat of being wound up by way of notice, the bailiff must have issued the notice of auctioning the properties of the company in question due to huge debts, the landlord of the premise must issue the warning of interrupting the business due to unpaid bills, the three quarter majority of the shareholder must have consented on liquidation, appointment of the administrator by the debenture holder and the company must be time barred. These conditions should be fulfilled to facilitate the administration of pre pack process.
Pre packing is the process which requires to be done in sequential fashion. When the company meets the above conditions and directors are certain that this is the only choice, they may start by forming the new entity. The administrator is appointed after the new limited company is completely registered. The process of disposing the assets of the old company to the brand new entity starts. The administrator then calls for the meeting of all creditors to inform them about the disposal. The administrator introduces the agenda of winding up the company and proceeds of financial transaction are shared among them.
The law requires the directors from the old company to pay all taxes to the customs authority to become the directors of the new company. Also, the administrator must be qualified and licensed insolvency practitioner. The transfer of assets from the old company towards the new one is done through legal sales agreements which are drawn by the administrator. The actual liquidation of the previous company takes effect upon the consent of the creditors.
Pre pack administration has a number of merits. The company will be able to retain its employees, suppliers and customers. This will make the company to sustain by itself in the market. This is far greater even to the country's economy than the company collapsing and employees losing their work.
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