Business recovery and reconstruction specialist Suzanne Jones has recently sought an opinion from the Pre-Pack Pool, one of just five applications made so far. She shares her experiences
AN application to the Pre-Pack Pool (PPP) is entirely voluntary, costing £800 plus VAT for an opinion. I recently submitted an application and my view is that the application form is riddled with technical difficulties, it is costly, time consuming and, frustratingly, it wastes valuable time during a complex transaction. In short, it serves no useful purpose whatsoever.
Right from the outset, I had many difficulties with the application form. It was not possible to print a copy of the whole form to review and ensure that I was in possession of all information before I started to complete it. Sounds like it shouldn’t be a problem, but once you start the application you only have 24 hours to submit it before it is deleted!
I did manage to find a page headed ‘Guidance Documents’ and collated most of the information listed, saving it into PDF and word documents. I did not, however, have a valuation, but this is not unusual when acting for proposed purchaser. I was ready to submit the application and I was faced with another difficulty: I was unable to upload the PDF documents. I had to obtain assistance from our own IT team late at night to insert these PDF documents into a word document before being able to upload. The notification, when it did arrive days later, was sent to my client and into his spam mail folder. It would have useful to also receive a copy.
Applicants to the PPP ‘should be able to provide…’
The PPP expect applicants to provide a lot of information, but it is the request that a valuation be included that causes particular problems.
It is my opinion that the independent valuation is crucial to be able to assess whether a proposed transaction is reasonable. However, this is obtained by the proposed administrator, not the proposed purchaser. It would be highly unusual for a proposed purchaser to obtain a valuation, and a proposed administrator is not permitted to show this to any interested purchasers. A proposed purchaser assesses what they believe to be the value. There are a number of ways they do this, including considering the book value and what they consider third parties are likely to offer for the business and assets. It appears that the PPP now want the proposed purchaser to spend additional time and cost obtaining an independent valuation.
No useful purpose
Personally, I do not think the PPP serves any useful purpose at all. The PPP was introduced with the objective of improving the perception of pre-pack sales by the general public.
Following my own experience it is difficult to see how the perception of pre-pack sales will improve by the proposed purchaser obtaining such a vague opinion based on very limited information. It is highly unlikely a PPP reviewer will ever receive details of a valuation and, in my view, this is crucial information needed to be able to assess the reasonableness of the proposed transaction.
The application is voluntary and there is no obligation to show the opinion to the proposed administrators nor is there anything to encourage a proposed purchaser to submit an application. I also fail to see how a proposed administrator, or lawyer, would persuade a proposed purchaser to submit an application. If a client ever questions why an application should be submitted, there is no answer other than it is industry practice.
Sadly, I do not believe that the PPP has achieved what it was created to do. It creates additional costs for a proposed purchaser and an application will only be submitted by those choosing to follow industry practice.
Suzanne Jones is a senior associate in the business recovery & reconstruction team at law firm Howard Kennedy. She can be reached by email: Suzanne.firstname.lastname@example.org.
Three new partners and seven business restructuring advisers have been appointed to the new Preston office
Leonard Curtis Business Solutions Group has opened a new office in Glasgow – the first Scottish office for the professional services provider
Vernon Dennis of Howard Kennedy LLP explores recent and future challenges faced by the insolvency sector
The average cost of fraud increased 35.4% to £3.9m in 2016, compared to 2015 data