Pre Pack Administrations To Remain In Current Form

27 January 2012

The long awaited government review into pre pack administrations has come to an end and Ed Davey, the minister responsible, announced that they are not going to reform them as they were "not convinced" that the changes would benefit the position for creditors.  The main change mooted was to give the creditors a 3 day window, during which they could be consulted on the process.  The insolvency industry believed that this would mean that the value of any business would be quickly eroded and the most forceful creditor could negotiate better terms by withholding supplies for instance.  On the other side creditors with legitimate reasons to want to be more involved in the process and perhaps launch a bid for the company felt that 3 days was simply not enough time to get themselves organised.  Both cases are most likely true so it was a non starter really.

The Insolvency Service said that it would look at ways that the process could be made more transparent and it is there that there may be room for improvement.  SIP 16 statements can sometimes be quite cryptic and do not always convince creditors that the company was sold for best value.