Pre-Packs Save Financially Distressed Companies

1. What is Pre-packaged administration?

A pre-packaged administration is a pre-planned insolvency procedure wherein a company arranges to sell its assets to a buyer prior to filing for insolvency to facilitate the sale and the creditors and shareholders approach a bankruptcy court with a pre-negotiated corporate reorganization plan (the "Pre-pack"). This sort of company rescue procedure significantly reduces the time taken in lengthy court proceedings for businesses undergoing financial distress.

Alternatively, the business or material assets can also be sold to the existing directors/promoters operating under a new company, which is usually resorted to if the business is facing serious problems and creditor threats. The director/promoter of a failed business may wish to purchase its assets or business in order to form a new company.