PRE-PACKS need to be updated to protect landlords better said the British Property Federation which has launched a campaign to highlight the issue.
In the same week international fashion chain Aquascutum entered administration the BPF is calling for rules around pre-pack administrations to be tightened to through better regulation of the insolvency profession.
The BPF wants insolvency practitioners to be clearer on what is included in a pre-pack sale and says that better regulation of practitioners is needed, such as a single body for complaints.
It also wants to highlight the “underhand practice” where the terms of what is exactly included in a pre-pack sale are “deliberately” kept vague.
A pre-pack is where the sale of a business is arranged prior to it entering administration and sold immediately after entering into the process.
Liz Peace, chief executive of the British Property Federation, said: “On both the flaws in pre-packs and better regulation of the insolvency sector, the government has frankly analysed the problems to death, and it now needs to act if it is to maintain unsecured creditors’ trust in the insolvency system.
The campaign, ‘Taking the Profit’ was launched in conjunction with the Association of British Insurers, which also claimed practitioners should focus on ensuring the highest return to the creditors and not favour potential buyers.
Nick Starling, director of general insurance at the ABI, said: “The pre pack process whereby a failing company is bought out and quickly resumes trading must be made more transparent, with better disclosure and accountability. The current system does not adequately protect the interests of unsecured creditors, many of whom will be SMEs, who rightly feel that their interests are not fully taken into account.
“Despite the professional and legal rules designed to prevent abuse, it is inevitable that a large proportion of pre-pack transactions will be structured to favour the owners of the business and their secured finance providers, who initially engage the insolvency practitioner and are privy to the design of the scheme, at the expense of unsecured creditors.”
The select committee heard that GT had not met up with the BHS pension scheme advisers or trustees, but had done so with Deloitte, Arcadia’s pension advisers
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