Pre-pack Administration
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Not sure what it is and how it can help your business?
80%
Over 80% Of Debt Wiped
Out On Average
100+
Companies Helped
£££
£Millions In Debt
Written Off
Pre-Pack Administration FAQ
Pre-pack administration is a form of administration where arrangements are made to sell off part or all of a business’s assets. Once an administrator is appointed, they will assess if the business can be saved by selling the assets in question. After the sale contract is executed, the pre-pack administration is complete. Unlike liquidation, which looks to sell off assets to pay off debt, pre-pack administration aims at rescuing a company. Those who buy the assets are usually stakeholders or new stakeholders with an outside interest in the company. The debt that has likely led to the initial process of administration is considered during the reacquisition of assets.
If you are new to the concept of pre-pack administration, it can be quite worrying to think about selling off the assets of your enterprise. We understand this, and it is hard to negotiate the sale of something you have worked so hard for. However, pre-pack administration is a popular and effective way to save a company. On top of saving your business from liquidation, it will also protect its brand, value, and commercial viability.
The Boardroom Punks want to level with you and give you the best advice possible. The valuable insights underneath will help you and your business. We are available today to book a free, confidential call if you need more specific advice. We have helped some of our previous clients wipe off 80% of their debt, and there is no reason why we cannot do the same for you.
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Pre-Pack Administration FAQ - The Punk way
What are the benefits of pre-pack administration?
A pre-pack sale can not only save your business but can help with staff retention. In addition to this, the value and branding of a company do not need to change, even if there is a change in the shareholders. Further, it is also quick to conduct. If the company shows promise and commercial viability, then it may be very simple for shareholders to buy assets.
Why is a pre-pack administration so effective in saving businesses?
It is so effective because of the speed at which it can be conducted. A generic administration process may take up to 12 months to complete. However, with pre-pack administration, the approach is already outlined. As soon as an administrator is appointed to conduct a pre-pack, they will immediately look to sell the assets to potential buyers. From 2016 to 2019, there was a 37% increase in total pre-pack sales, with 128 more conducted. It has become more popular because of its efficiency.
How many pre-pack sales make up the administration process?
Of total administrative procedures, pre-pack sales take up around 30%. This is a considerable amount, emphasising its popularity among insolvency practitioners.
Is it better to conduct a pre-pack sale to someone connected to the existing business or someone outside the business?
There are pros and cons for each. For instance, existing shareholders may know the company better because of the familiarity they have with a business model. However, their methods of direction may have contributed to the outstanding arrears. In contrast, an outsider may not be familiar with the business model, but they may offer an alternative approach to help the company grow in the long run. Statistics highlight that outside buyers tend to help the pre-pack sale succeed, with 84% of them doing so. Existing shareholders or those already known to the company succeed 71% of the time when a pre-pack sale is instigated.
What is needed for pre-pack administration?
A company must be in financial difficulty to register for pre-pack administration. An enterprise must have outstanding debt, and a majority of the shareholders must agree upon the decision to appoint an administrator. On top of this, an insolvency practitioner must be the one who decides on a pre-pack administration. A board of directors may believe that it is the best decision, but once a company is in administration, the assets are outside of their control.
With what problems may a pre-pack sale be considered?
The usual circumstances when a pre-pack sale surrounds debt owed to creditors. However, there are other circumstances where it is an effective way to help rescue a company. One of these is in relation to cash flow. If there is an issue with expenditure and the income of money, then a pre-pack sale may invite new investors that can control the purse strings better. It will also be considered if there is knowledge of a potential buyer who is either successful with business and accountancy or has adequate money to pay off debts immediately. If the company is profitable and looks likely to survive through insolvency, then it is likely that pre-pack sale will be considered.
With what problems may a pre-pack sale be considered?
Once a company is put into administration, then the control of assets is no longer in your hands. However, if you refuse the option of administration, then you are free to walk away to try and find your own alternative to pay off the debt. The Boardroom Punks understand the pressure when it comes to the control of assets, and if we do decide that pre-pack administration is the best option for your company, then we will be with you every step of the way. Communication and support are key to our clients, and our innovative approach to business will allow you to see a long-term future with your enterprise.
What if I refuse to undergo a pre-pack sale?
The usual circumstances when a pre-pack sale surrounds debt owed to creditors. However, there are other circumstances where it is an effective way to help rescue a company. One of these is in relation to cash flow. If there is an issue with expenditure and the income of money, then a pre-pack sale may invite new investors that can control the purse strings better. It will also be considered if there is knowledge of a potential buyer who is either successful with business and accountancy or has adequate money to pay off debts immediately. If the company is profitable and looks likely to survive through insolvency, then it is likely that pre-pack sale will be considered.
Can I be part of the negotiations in a pre-pack sale?
Unfortunately, you may not be able to be part of the negotiations of a pre-pack. One of the issues associated with pre-pack administration is a conflict of interest. We want to ensure that we can do everything we can to make the process successful. If there are new shareholders invited into the business and control of the existing assets, then we will make sure that they are the right fit for the business model. Running a business requires the right people. All options will be considered in great detail before a decision is made.
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