Pre-pack pool ‘open for business’ by October
Pool of reviewers responsible for scrutinising pre-pack administrations to start taking cases by October
THE BODY responsible for scrutinising pre-pack administrations is expected to start taking cases by October, it was announced at the ICAEW’s annual insolvency conference yesterday.
Set up following a government-commissioned review into the use of the heavily-criticised administration process, the so-called ‘pre-pack pool’ is scheduled for a potential launch on 1 September but “taking cases may take until October”, one of its directors said.
Stuart Hopewell,fellow of the Chartered Institute of Credit Management and one of three directors at the independent pre-pack pool stakeholder group, said 21 members had signed up to the group, including two retired insolvency practitioners.
The creation of a pre-pack pool was among a series of recommendations put forward by Teresa Graham, the senior accountant who led a review into the use pre-pack administrations – where the sale of the business is marketed prior to the company entering administration and subsequently sold on appointment of administrators – aimed at making the process more transparent, fair and give creditors a better deal.
The pool’s job is to scrutinise deals where there is a “connected party” involved, such as a director of the failed business. The process is “geared up to be quick, automated and online,” Hopewell said, and allayed fears that the pool of reviewers would spend to long deliberating on deals.
He said the pool had given assurances it could “get the job done within 48 hours” and that two days should not be a “deal stopper” for pre-pack sales. “I don’t accept that pre-packs are not pre-planned,” he said.
Graham’s recommendations also include the introduction of a ‘viability review’, stating how the company will survive for at least 12 months from the date of the statement and new guidance around how deals are marketed. The measures are voluntary, but the government has introduced a clause in the Small Business Act 2015 that allows it to ban pre-pack sales to connected parties if the measures are not adopted.
The legislation has not been enacted and comes with a sunset clause, whereby the clause will disappear if it is not enacted within five years.