It’s Better Than Nothing

Q&A Pre-pack administrations may offer the best outcome for unsecured creditors

Explanation

Old Co is subject to a pre-pack administration. This means that it has been put into administration and its business and assets have been sold under a sale that was arranged before the administrator was appointed. This procedure is becoming increasingly common in the current economic climate.

Advantages and drawbacks

A pre-pack sale provides for a quick transfer of the business; it can minimise loss of confidence on the part of suppliers, customers and employees and save more jobs than a normal administration. However, such arrangements are perceived as being too opaque. Since the Insolvency Act 1986 does not expressly provide for pre-packs, administrators do not have to obtain prior approval for such sales from the court and creditors, as they would in a normal administration. As an unsecured creditor, you would not have received prior warning of the sale and were