THE INSOLVENCY profession has hit back at claims from the British Property Federation that pre-packs need to be updated to restore fairness.
Lee Manning (pictured) insolvency trade body R3 vice-president, said: “We do not accept that the UK’s insolvency system is not fair.”
He added, in an insolvency situation a business has no money so creditors are unlikely to be satisfied with the outcome.
However, he hit back that landlords need to be flexible to help companies before the point of insolvency.
“Retailers are struggling with leases that were set up during the good times and set up many years ago. It is time for landlords to be more flexible before the point at which struggling businesses reach insolvency.
“We should all be working together to preserve jobs in tough economic times.”
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.
The BPF has launched a campaign “Taking the Profit” 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: “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 BPF wants pre-packs to be more transparent to include information as to what concessions in retail collapses will be included in a sale; and a single point for making complaints about a process that does not involve the courts, among others points.
Manning added that R3 was currently in discussions with government to look at ways to improve transparency and trust in the pre-pack process. He added he would appreciate the opportunity to discuss the BPF’s concerns and to reach a conclusion.
Earlier this year the government made a u-turn on proposed changes to pre-packs which would have seen the process delayed by up to three days if a business was sold to a connected party.
Colin sums up some people's attitude towards the result of the EU referendum using just two cups
Head of editorial Kevin Reed discusses the result of the EU referendum, and explores it means for accountants
Discover what the national newspapers are saying about Brexit
What questions should the profession be asking now the UK has decided to leave the EU?