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The Government Pension Protection Fund – Guidance For Insolvency Practitioners

The government Pension Protection Fund (“PPF”) has issued guidance to insolvency practitioners when acting as administrator in a pre-pack from 1st July 2015.

Normally, the person who was the administrator becomes the subsequently appointed liquidator.

In essence, the PPF may look to have the proposed appointed liquidator or supervisor of a Company Voluntary Arrangement replaced by a new insolvency practitioner. The key issues that that the PPF will consider in making such a decision are:

  • The level of consultation undertaken with the PPF before the pre-pack.
  • The nature of the business in trouble and whether it could have been traded and sold rather than pre-packed.
  • The reasons for the insolvency and the rationale of the pre-pack.
  • Any interaction with the Pensions Regulator.
  • The on-going involvement of the old company shareholders and directors in the new company.

In addition, the pre-pack pool was brought in from 1st October 2015. This is a pool of people who will review the justification for a pre-pack on a case-by-case basis in just two business days. The cost is £800 plus vat. Essentially they will give or not their support to the rationale for the pre-pack. However going to the pre-pack pool is not mandatory.

In my opinion it makes sense to say that any Insolvency Practitioner who has acted as Administrator in a pre-pack should be replaced at the stage the company goes into liquidation unless the pre-pack has pool approved the transaction. This would give some transparency and openness to the decision of using a pre-pack. It would help to justify to creditors that a pre-pack is a very useful tool in the right circumstances to save a viable business.

If you would like to know more about pre-packs and liquidation or have a no obligation chat, speak to our team today. Find out more about the Pension Protection Fund here.

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