New laws will give the Government powers to independently scrutinise pre-pack administration sales before they can be approved, it has been revealed.

The legislation, announced last year, has now been formalised after the Government laid draft regulations in Parliament this month.
As defined by the Gazette, a pre-pack administration is an arrangement whereby “the sale of all or part of a company’s business and/or assets is negotiated and agreed, before an insolvency practitioner (IP) is appointed”.
In most cases, pre-packs are welcomed as it ensures that a viable business can continue to operate without a detrimental break in trading, protecting its value and workforce.
However, reports suggest that some pre-pack administrations involving connected parties, such as the insolvent company’s existing directors or shareholders, may not always realise the full value of the business.
To combat this, the new legislation will require mandatory independent scrutiny of pre-pack administration sales where connected parties are involved in the purchase.
The Government said the changes will “improve confidence and transparency in pre-pack administration sales” and ensure that creditors’ interests are protected.
“Pre-pack sales play an important role in rescuing viable businesses, while protecting jobs and supporting our economy,” said Minister for Corporate Responsibility Lord Callanan.
“As we continue to tackle Covid-19, it is more important now than ever that people have confidence in the insolvency process.”
Colin Haig, President of insolvency and restructuring trade body R3, added: “The insolvency and restructuring profession is very sensitive to the impact of pre-packs on creditors, and there is a careful balance to strike in these situations between transparency, protecting creditor value, and business rescue, which these proposals support.”
If approved by Parliament, the measures could come into effect by the end of this year.
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