Business Rescue Service

Pre-Pack Administration

Rescue your business by purchasing the assets under a new company. A pre-pack allows you to continue trading, preserve jobs, and start fresh.

Call 0800 086 2766 Book Free Consultation

What is a Pre-Pack Administration?

A pre-pack administration is a type of company administration with slightly different processes. It 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. 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.

Pre-Pack Administration Process

Creditor Pressure

Usually, the first step in a pre-pack is that the insolvent company in question is facing creditor pressure. This can be apparent in many ways — from emails, calls, visits and more.

Warning: 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.

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.

Get all proposals in writing before making appointments

Only choose from licensed insolvency practitioners

Discuss wrongdoing and personal guarantees

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.

Important: Selling assets undervalue is an offence that could land you in a lot of trouble as a director.

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

Advantages of a Pre-Pack Administration Sale

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

Business rescue — the existing directors may be able to rescue the company in a new form with changed business operations

Better for creditors — works in the interest of creditors as they may receive more of the money they are owed

Preserves employment — can help preserve the company and maintain continued employment for staff

Speed — pre-pack administrations are relatively quick compared to other insolvency procedures

Business continuity — allows for seamless transition and continued operations

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:

Financial commitment — the new company will have to commit to purchasing the assets of the business over a period of time

Potential scrutiny — directors may face scrutiny from creditors, which can lead to a poor business reputation

Competition — other people may have the opportunity to purchase your company, including 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.

Get Everything in Writing

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.

Why Seek Advice Early?

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.

Looking for Advice on Pre-Pack Administration?

At Director First, we provide accurate, confidential advice for company directors who are considering a pre-packaged administration. We'll help you understand if a pre-pack is the right option and guide you through every step of the process.

Call 0800 086 2766 Text 0741 5805 851

Frequently Asked Questions

Common questions about pre-pack administration

What is a pre-pack administration?

A pre-pack administration is a type of company administration where the sale of the company's assets is arranged before the administrator is appointed, with the sale completing immediately after appointment. In many cases, the assets are sold to the existing directors through a new company, allowing the business to continue trading.

Can directors buy back their own company?

Yes, in many cases directors can purchase the assets of their insolvent company through a new company. However, there are strict rules and regulations that must be followed, including independent asset valuations and evidence that the new company can afford to purchase the assets. The new company must also demonstrate solid cash flow and balance sheet forecasts.

Why do assets need to be independently valued?

Independent asset valuations are essential to ensure assets are not sold undervalue. Selling assets undervalue is an offence that could land you in serious trouble as a director. The independent valuation provides evidence that the sale price is fair and in the best interests of creditors.

How does a pre-pack benefit creditors?

Pre-pack administrations can work in the interest of creditors because they often achieve a better outcome than a straight liquidation. The quick sale preserves the value of the business as a going concern, and creditors may receive more of the money they are owed compared to if the assets were sold off individually.

Can competitors buy my company in a pre-pack?

Yes, one of the disadvantages of a pre-pack is that other parties, including competitors, may have the opportunity to purchase your company's assets. The administrator has a duty to achieve the best outcome for creditors, which may mean selling to the highest bidder rather than the existing directors.

How much does a pre-pack administration cost?

There is no one-size-fits-all pricing structure for pre-pack administrations. The total cost depends on various factors including the number of assets, the number of creditors, and the complexity of the case. A small pre-pack will naturally cost less than a larger one. It's important to get all costs in writing before proceeding.

Is a Pre-Pack Right for Your Business?

Get expert advice on whether a pre-pack administration could help you rescue your business and start fresh. We'll explain your options clearly.