A. James Bradney writes:

Possibly. A pre-pack is an arrangement whereby someone agrees to acquire a business and its assets from the administrator either immediately on or shortly after its appointment but without the firm being offered for sale on the open market. The acquirer may be a third party or connected with the existing shareholders and senior management. Negotiations take place between the potential purchaser, the directors and the proposed administrator in the period leading up to the insolvency. It’s not always possible, but an accelerated M&A sale process with several interested parties would ideally be conducted during this period.

A pre-pack is usually appropriate where the administrator is unable to trade the company or where value would be lost were the sale not conducted in advance of the insolvency. A ‘traditional’ administration typically involves a period of trading under the administrator while a public marketing of the opportunity is conducted. A responsible
administrator will ensure any pre-pack operates in the interests of all creditors, not the purchaser. It will also have to comply with SIP16, regarding the disclosure of all relevant facts due to creditors.

You say you believe your business is intrinsically viable, but a relatively short period of poor trading has resulted in financial pressures. A Company Voluntary Arrangement (CVA) may be a more appropriate restructuring tool as, subject to creditor approval, it may provide for a proportion of the company’s debts to be written off and the balance repaid from future trading profits, while allowing you to avoid the stigma of going into administration or liquidation.

Seek immediate advice from an independent insolvency practitioner. Continuing to trade while the firm is or may become insolvent exposes creditors and directors to additional liabilities.

James Bradney is a founding partner of the firm that is now Bridge Business Recovery LLP. He has extensive experience in dealing with corporate insolvency. www.bridgebr.co.uk