In more detail
If the company is insolvent then a pre-pack Administration can be a method of saving a business and allowing it to be sold to a new owner. This is even if the new owner is partly an old owner. The key issues are that the business has to have been advertised for sale and the buyer is paying the best price.
There are two legal definitions of insolvency and these are;
- The company has liabilities that exceed its assets.
- The company is unable to pay its debts as they fall due.
Using a pre-pack administration to take control of a business in a shareholder dispute is obviously going to leave the non-winning shareholder very unhappy but it is a legal mechanism to resolve the deadlock without going to Court.
