‘Pre-pack’ administrations boosted by court decision

'Pre-pack' administrations boosted by court decision

Judge decides to allow a pre-packaged sale of a business entering adminsitration, despite major creditor HMRC's opposition to the plan

A High Court has blocked the taxman’s attempt to halt a sale of a business
through a pre-pack administration, in what could be seen as a landmark case for
the insolvency tool.

HMRC wanted to wind up DKLL Solicitors in an attempt to receive money owed
through a liquidation.

However, administrators from BDO Stoy Hayward argued that a liquidation would
see the taxman receive very little of the £1.7m owed to it.

The administrators had lined up a sale of the business prior to
administration worth £400,000 in a ‘pre-packaged’ deal.

HM Revenue & Customs argued that where the courts knew that, as the major
creditor, it opposed the pre-pack, the taxman should be allowed to block the
sale.

Andrew Simmonds QC, sitting as judge, said that the administrators’ plan
seemed the best way to safeguard the solicitors’ 50 jobs and would protect its
clients’ interests.

‘I am particularly influenced by the fact that the proposed sale is also
likely to result in the affairs of the partnership’s clients being dealt with,
with the minimum of disruption,’ said Simmonds.

Insolvency trade body R3 stated that the ruling showed that administrations
could be granted even when opposed by a major creditor, as the judge decided to
give weight to the fact that the pre-pack was formed impartially from insolvency
practitioners’ expertise and experience.

Further reading:

‘Quickie’ insolvencies help preserve
jobs

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