‘Phoenix’ Pre-packs

On March 31 the minister for business innovation and skills, Ed Davey, announced proposals to require administrators to give notice (a three-day notice period has been suggested) to creditors where they propose to sell a significant proportion of the assets of a company or its business to a connected party in circumstances where there has been no open marketing of the assets.

The proposals are described as aiming to improve the transparency of, and confidence in, pre-packaged (pre-pack) sales by administrators, who have been criticised for rushing through the sale of insolvent businesses, leaving creditors with little or no time to question the sale.

A so-called 'pre-packaged sale' is a sale of all or part of the business and assets of an insolvent company which is negotiated before the company enters a formal insolvency process and which is concluded immediately upon the company's entry into an insolvency procedure – often administration.