Pre-pack sales – time for creditors to have their say?

Pre-pack sales of business are like Marmite – you either love them (usually if you’re the business owner) or you hate them (usually if you’re the creditor).

A pre-pack sale allows the owner of a stricken business to form a new company, buy the assets of his or her former business, and, more or less, start again. Creditors, more often than not, miss out on what’s owed to them – but do have the chance of continuing to trade with the new company if they wish to.

Now, you might get the opportunity to tell those in Westminster what you think of pre-packs.

The Government has said this month that it is undertaking an assessment of the impact of the voluntary industry measures introduced in November 2015 to “improve the transparency of connected party pre-pack sales in administration” and will be contacting a variety of interested parties to seek their views.

The industry measures arose from the recommendations of the 2014 independent Graham Review, which found that pre-pack sales were a useful business rescue tool, but that there was evidence of less successful outcomes where the pre-pack sale was to a connected party.

As well as industry reforms, the Small Business, Enterprise and Employment Act 2015 created a power for Government to make regulations to impose conditions on property sales to connected parties in administration (including via a pre-pack). This power expires in May 2020.

The assessment will look at the impact of reforms on all connected party sales in administration and will help to inform decisions on whether further regulation is needed prior to the expiration of the regulation making power.

So, if you’ve got something to say, now could be the time.

If you need Debt Recovery assistance, Rothera Sharp have the team for you. Call our solicitors on 0800 088 6280 or email enquiries@rotherasharp.co.uk

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Terhi Sygrove - Rothera Sharp Solicitors, Nottingham