What is Prepack Liquidation?

A prepack liquidation is a fast and effective route out of insolvency and it transfers assets to a new company. It’s not the most common insolvency procedure, but it does provide a valuable option for companies in distress.https://pre-packadministration.co.uk

The process starts with a board resolution that recommends a pre pack administration. This must be passed before insolvency practitioners can take action and begin the process of identifying a buyer. They will also carry out a thorough valuation of the company’s assets and create a Statement of Affairs that contains the administrator’s proposal to creditors, demonstrating every other insolvency option has been considered.

Examining Prepack Liquidation: Important Factors to Consider

After the purchase of the company’s assets has been agreed, the insolvency practitioner will enter the old business into administration and the sale will complete. Once this has happened the administrator will hold a meeting with the insolvent company’s creditors to give them a detailed report about why they have chosen the pre pack sale and to explain exactly what the money realised from the process is going to be used for.

The main benefits of a pre pack liquidation are that it can preserve value by allowing a quick sale, it allows for a seamless transfer and enables a continuation of business activities via largely uninterrupted customer service and supplier contracts. It can also help to save jobs if implemented at the earliest sign of insolvency. However, there are some disadvantages to the process that must be taken into account. These include the lack of transparency; private negotiations with a limited number of stakeholders and the transfer of assets to connected parties have all caused concerns about fairness for creditors. New laws requiring independent scrutiny of the process are being introduced to address these concerns.

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