Directors warned against misusing pre-packs

Company directors have been warned against miusing pre-pack administrations
to benefit while creditors lose out.

According to the Financial Times, The government’s Insolvency Service made
the statement as it became clear that company insolvencies had hit record levels
in the third quarter of last year.

Graham Horne, deputy chief executive at the Insolvency Service, is quoted in
the FT saying: ‘We will be looking to use our enforcement powers to clamp down
on any directors who misuse the administration process to disadvantage creditors
or seek to gain benefit for themselves.’

The pre-pack process is used to sell a technically insolvent company with the
consent of secured creditors at an accelorated pace and avoid the damage to
reputation that comes with a traditional administration.

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