Will this summer see the Pre Pack make a Comeback?

Will this Summer see the Pre Pack make a Comeback

As the UK bakes in the hottest temperatures seen this year and many people are looking forward to some well deserved down time and holidays, for many businesses the Summer is bother being looked forward to and dreaded.

There is optimism that things will improve for their business and that after two years of disruption they can finally say that things are getting back to “normal” but there is always the experience of this time that tells us that things can change very quickly and that what was normal in 2020 might not be seen again in 2022 or anytime soon.

A concrete example of how things are changing how pre pack administrations are being used.

Because of various restrictions on winding up petitions and the creation of bounce back loans and other support measures, the number of administrations has reduced tremendously since 2020.

According to recent Insolvency Service statistics, administrations have been over 100 for three months in a row for the first time since March 2020 and are now 51% higher than they were 12 months ago.

So if they are being used more by insolvency practitioners then we can expect to see more pre pack administrations being used also.

What is a pre pack administration and how are they different from a regular administration?

What is a Pre Pack Administration

The main difference is in the sale process itself.

In a pre pack administration, speed is of the essence so as much as possible is agreed with a price before the administration process itself begins.

This can include assets of own business, stock, any intellectual property and everything that could be included including the trading name and goodwill.

Once an administrator is appointed to conduct the sale then this pre-agreed deal can be completed sometimes without the business being advertised as for sale at all.

Chris Horner is the insolvency director of BusinessRescueExpert and has personally overseen many pre-pack administrations.

He thinks it brings many advantages to the process. He said: “Selling a business in administration would usually involve advertising it for sale but that’s not how it works with a pre pack.  In fact, there are some good reasons why an administrator could choose not to.

“It reduces costs of not having to pay for advertising and other measures to fund a campaign and reduces other associated administration expenses.

“It also keeps relationships with customers and employers good and maintains the goodwill of the business because it will take a lot less time to complete than a standard administration sale. It will aid continuity because any deal can be completed quickly and the business can continue running as normal while these matters are dealt with behind the scenes.”

A pre-pack administration is just one insolvency procedure that could help businesses not only survive but ultimately thrive once they have dealt with the immediate financial difficulties they face.

But the best and most important step to take now is to get some impartial professional advice on what to do next.

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