Pre-Packaged Sales & Their Benefits
Pre-pack administrations are something that are commonly known but often mis-interpreted in the press, and therefore only it’s negative points are noted; they do however, have huge benefits that will be explored throughout this article.
What Is a Pre-Pack?
A Pre-pack (or pre-packaged sale in Administration) is an arrangement made prior to a company going into Administration, for the sale of all or part of a company’s business and assets. The sale is usually completed by the Administrator immediately upon their appointment.
What is SIP16?
SIP16 (or Statement of Insolvency Practice 16) is a disclosure requirement of Insolvency Practitioners when a Pre-pack Admin has been undertaken.
How Does SIP16 Help?
It helps because a Pre-pack is an often a process where the company’s assets are sold quickly therefore creditors often feel that they don’t have enough chance to raise concern or objections. SIP 16 was introduced as a requirement to disclose information to allay such concerns.
When a pre-pack sale occurs there is a list of information that has to be disclosed in order to meet with requirements so that creditors are made aware of the sale. During company administration creditors have a right to object to any concerns that are made against their interests, which could mean the administrator is not working quickly and efficiently; there is also a hotline that creditors can use to contact the Insolvency Service if they wish to raise a complaint.
SIP 16 was introduced to try and ensure that there is transparency during pre-pack administration, practitioners are required to:-
– Record reasons why pre-packs have been chosen
– Ensure directors are aware that they are advisers to the company
– Support directors in actively seeking independent advice
What Are The Benefits?
There are concerns with using pre-pack administration, nevertheless there are huge benefits including;
– Smooth and quick transfer of business and its assets
– Lessens the worry of customer, employee and supplier confidence with the business
– Saves employee jobs
As well as the above benefits creditors often gain as lower costs mean businesses are often in a position where they can afford to repay more to their creditors.
See our review of high profile pre-packs done HERE.