Pre-packs should be left to IPs’ judgement

Pre-packs should be left to IPs' judgement

Reform of a controversial insolvency procedure that has provoked claims that it treats creditors unfairly, is unlikely, according to R3 president Tony Supperstone

Legislation has been mooted to manage the controversial process of pre-pack
administrations, where an accelerated sale of a business is undertaken to
maximise the sale price, but often without discussions with all the major
creditors. Suggestions have included forcing administrators to file a statement
with the courts giving details of why a pre-pack approach was taken to sell the
struggling business.

But Supperstone said that while the business recovery body might produce some
best practice guidance in the future, IPs should be left to make their own
decision over whether to enter into a pre-pack, and no discussions were taking
place between the body and the Insolvency Service to look at overhauling current
insolvency legislation.

‘Perhaps we will produce guidance at some time in the future, but if the IP
is satisfied with the value they gained for a business, then that’s fine,’ said
Supperstone.

Begbies Traynor senior partner Nick Hood said that it was ‘better’ to let
best practice and oversight by the profession handle concerns over pre-packs.
‘The vast majority of pre-packs are a pragmatic reaction to a certain set of
circumstances the IP faces,’ he said.

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