Don't kill off pre-packs, says insolvency chief

THE MOST senior insolvency practitioner at KPMG has publicly warned against reform that could see the controversial “pre-pack” administrations removed from the armoury of business recovery experts.

In a letter published in the Financial Times Richard Fleming, head of restructuring at KPMG (pictured above), said: “It would be a step backwards for the insolvency regime if the pre-pack mechanism were lost through best-intentioned efforts to eradicate system abuse.”

Pre-packs see failing companies enter administration and sold to buyers almost simultaneously. They have been accused of being open to abuse and allowing the ‘phoenixing’ of ailing businesses where directors use the process to avoid debt.

Last week, proposals for reforming pre-packs emerged from the department of business. They include time for creditors to oppose a connected-party sale and making public the obligatory reports that follow each pre-pack. Currently the reports only go to creditors and the Insolvency Service.

Fleming said: “Pre-packs are an important and effective tool in the insolvency practitioner’s kit: protecting fragile business value and saving jobs.”

He adds: “Of course of the challenge in any reform is to ensure the cirrect balance is struck.”