When directors feel overwhelmed by mounting business pressures, it’s not a sign of irresponsibility. Exhaustion and stress can quickly spiral, leading to creditor pressure, HMRC demands, and staff anxiety. Chris Worden shares a real case where a longstanding retail and trade business was rescued through pre-pack administration.
- Business faced cash flow crisis and HMRC arrears
- Director sought help after months of stress
- Time to pay and CVA options were rejected
- Pre-pack administration preserved jobs and business
- Chris Worden guided the director through the process
Background: When Pressure Mounts
Many directors freeze under pressure, not due to neglect but because the situation becomes unbearable. In this case, a family-run retail and trade business, established over a decade, was hit by rising costs, reduced demand, and a major drop in cash flow. Suppliers tightened terms, HMRC arrears built up, and the director was at breaking point.
Initial Steps: Seeking Help
The director reached out to Chris Worden, admitting he could no longer cope. After months of sleepless nights and worry, he finally asked for help. Chris and his team assessed the business, looking for ways to rescue it.
Exploring the Options
1. Informal Time to Pay with HMRC
They first tried to arrange a time to pay with HMRC, but the request for a three-year plan was rejected. HMRC’s refusal left the business with few alternatives.
2. Company Voluntary Arrangement (CVA)
A CVA was considered, but HMRC and other creditors were unlikely to support it. The business’s weak cash flow made long-term repayments unsustainable.
3. Liquidation
Liquidation would have closed the business, made staff redundant, and destroyed years of work. This was not a viable option as the business was still fundamentally sound.
The Solution: Pre-Pack Administration
Pre-pack administration allowed the business and its assets to be transferred to a new company with the same directors. An independent agent valued the business, and the sale was marketed transparently. The new company acquired the assets, and all staff transferred under TUPE rules, ensuring job protection and business continuity.
Why Pre-Pack Was the Best Outcome
- All jobs were saved
- Customers saw no service interruption
- Creditors received a better return than in liquidation
- The director got a fresh start without historic debt
Chris Worden and his team supported the director throughout, helping him prepare mentally and practically for the transition.
Key Takeaways
- Seek help early—more options are available
- Pre-pack administration can save viable businesses
- Job protection and business continuity are possible
- Professional guidance, like that from Chris Worden, is invaluable
Frequently Asked Questions
- What is pre-pack administration?
- It’s a process where a business and its assets are sold to a new company, often with the same directors, to preserve value and jobs.
- How does pre-pack administration differ from liquidation?
- Pre-pack aims to save the business and jobs, while liquidation closes the company and sells assets to pay creditors.
- Can all businesses use pre-pack administration?
- No, it’s suitable for fundamentally viable businesses facing short-term financial distress.
- Will staff lose their jobs in a pre-pack?
- Usually, staff are transferred to the new company under TUPE, so jobs are protected.
- How do I know if pre-pack is right for my business?
- Seek advice from a professional like Chris Worden to assess your options based on your business’s situation.
