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Can I Use A Pre-Pack To Settle A Shareholder Dispute?

The quick answer

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.

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;

  1. The company has liabilities that exceed its assets.
  2. 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.

tip

If you need insolvency advice the earlier you talk to someone like us the better as you will have more options. We can help, contact us today.
We have just worked with Kirks to complete the closure of our company. Everything went smoothly and professionally. I would recommend this firm and the staff who were very very helpful and quickly finalised everything. Thank you Kirks.
Carol Hill

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David Kirk Portrait

David Kirk

Licensed Insolvency Practitioner