What is a pre-pack administration?

A pre-pack administration is a type of company administration with slightly different processes. A pre-pack administration involves selling the company’s assets, in many cases, to the same directors of the insolvent company.

In most cases, the aim of the pre-pack is to close one company and open another offering the same services. This involves purchasing the company and its assets under the new company name. However, there are some rules and regulations that must be followed for this to be successful.

Pre-pack administration process

As with many other insolvency processes, they can be challenging to understand. At Director First, we know from experience how important it is that you receive the most accurate information regarding these processes, and we’re here to help with the pre-pack process.

Step 1: Creditor pressure

Usually, the first step in a pre-pack is that the insolvent company in question is facing creditor pressure. Creditor pressure can be apparent in many ways, from emails, calls, visits and more. Over time, the more you ignore creditors, the more they will usually ramp up the pressure. This can lead to a winding up petition and compulsory liquidation – which is best avoided if possible.

If you are struggling to pay company debts, it’s very important that you seek professional advice as early as you can. Failing to seek advice early regarding financial difficulty could lead to director scrutiny later down the line.

Step 2: Contacting a professional

It’s crucial that you seek professional insolvency advice. An insolvency expert can help you understand your options and advise you on the next steps for your insolvent business.

Make sure that all proposals are provided in writing before you make an appointment. At Director First, we provide accurate, confidential advice for company directors who are considering a pre-packaged administration.

Only choose from licensed insolvency practitioners. They will be able to provide the most accurate advice and discuss your personal position. They will look into elements such as wrongdoing and personal guarantees

Step 3: Asset valuation

If you select a pre-pack administration option, you will need to have all of your company assets valued. An independent valuation company should complete this, and you must obtain documentation. Selling assets undervalue is an offence that could land you in a lot of trouble as a director.

After the independent valuations of assets, the new company’s financials must be assessed to ensure that it can afford to buy the assets. The new company will need to provide evidence of solid cash flow and balance sheet forecasts.

At this stage, you are going to be in a better position to understand whether a pre-pack administration is going to work for you.

Looking for advice on Pre-Pack Administration?

Advantages of a pre-pack administration sale

Providing that a pre-pack suits you, there can be many benefits.

  • The existing directors may be able to rescue the company in a new form with changed business operations
  • Works in the interest of creditors as they may receive more of the money they are owed.
  • Pre-packaged sales can help to preserve the company and maintain continued employment.
  • Pre-pack administrations are relatively quick.
  • Allows for business continuity.

Disadvantages of a pre-pack administration

As with anything, there are disadvantages that you must also consider when it comes to a pre-pack sale.

  • The new company will have to commit to purchasing the assets of the business over a period of time.
  • Directors may face scrutiny from creditors, which can lead to a poor business reputation.
  • Other people may have the opportunity to purchase your company. Potential buyers can include competitors.

How much does a pre-pack administration cost?

There is no one-size-fits-all pricing structure when it comes to a pre-pack sale. Every business is different, and the total cost depends on a number of factors, from the number of assets to the number of creditors. 

A small pre-pack administration will naturally cost less than a larger one. It’s very important that you get all costs in writing, as this can help to reduce the risk of issues further down the line.


Chris Worden

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