Written ByKeith Steven
Managing Director
keiths@ksagroup.co.uk 07879 555349
He has rescued hundreds of companies and helped many of them turn around using CVA or pre pack. Could he help YOUR company?! Call him now 07833 240747
Pre-pack administration and liquidation restarts (phoenix companies) are both viable insolvency proceedings which have attracted controversy in the past. They have similar functions in that they allow a business to continue in a new guise. Here, we’ll explore both pre-pack administration and liquidation restarts and determine the key differences between the two.
Pre-pack administration is when a company organises the sale of its assets before it appoints administrators.
The company does this by using an Insolvency Practitioner (IP) to negotiate on its behalf. The IP will sell the business on to a trade buyer, a third party or ‘newco’ (a new company formed by the existing company’s directors).
This quick and easy process stops all legal action and debt recovery and it allows the business to continue in a new company with the minimal of disruption. Employees can continue to work with the new company. The money paid by the new company for the old company is used to pay off the debts. The process is all done in one move.
A liquidation restart, sometimes known as a ‘phoenixing‘, is where the directors start a new company after the old company has gone into liquidation and then buys it assets such as stock, website etc.
The business assets must be sold at a fair price. Otherwise, directors could face repercussions from the Insolvency Service, including director disqualification.
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