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What are the new rules governing connected sales in pre-pack Administrations?
New rules governing the connected sale in pre-pack Administrations come into force on the 30th April 2021. This will mean that a company must be in Administration for at least eight weeks before the substantial business and assets can be sold to a connected party.
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When Should I Use Pre-Pack Administration?
A pre-pack administration is beneficial when you have an insolvent business worth saving and know a potential business buyer. This buyer may be the existing shareholders and management or alternatively you may know another possible buyer or feel that advertising would help find a buyer in a short period of time.
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Pre-Pack Administration – The Rules
Pre-pack administrations are the sale of an existing business to a new business, subject to various rules that need to be complied with when operating in the UK.
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Advantages And Disadvantages Of A Pre-Pack Administration
A Pre-Pack Administration is a very effective and quick way of saving a business. However, they are not usually popular with creditors because they find out the business has sold after the sale has taken place and it is then too late to do anything about it.
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What Is A Viability Statement?
This is used in a pre-pack administration to prove that the person buying the assets and business are viable themselves and will not fall quickly into insolvency.
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Guide to Pre-Pack Administration
A Pre-Pack Administration is where the buyer of the business has been agreed before the date of the Administration order. On the date of Administration the business is sold and then the majority of the creditors, shareholders and employees are notified after the event.
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The Difference Between Pre-Pack Administration And Company Voluntary Arrangements
A pre-pack Administration means the company ends and a new one is formed. A Company Voluntary Arrangement means the existing company carries on.
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What Is A Pre-Pack Pool?
This is an independent body that the buyer of a business in Administration can approach to effectively endorse (or not) the purchase of the business using a pre-pack Administration. It is not a statutory requirement.
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Can I Use A Pre-Pack To Settle A Shareholder Dispute?
Yes you can. The company has to be genuinely insolvent (see the two definitions below) and the business has to be advertised for sale. If one of the shareholder/directors is the winning bidder they can buy the business back and take control even if the other owner does not want them to have control.
