Pre-pack administration

A pre-pack administration is where the sale of a company business and assets is arranged before the company formally enters administration, and then completed by the administrator immediately on appointment. The aim is to preserve a viable business, jobs and goodwill that would be lost if trading stopped during a drawn-out process. The business often continues with little visible interruption. Because the buyer is frequently connected to the existing directors, the procedure is tightly regulated: since 2021, a connected-party purchaser must obtain an independent written opinion from an evaluator before the sale, and a Licensed Insolvency Practitioner must be satisfied the deal is the best available outcome for creditors. Pre-packs are legitimate and sometimes the only way to save value, but they attract scrutiny, so transparency and proper valuations are essential. A practitioner will advise whether it is appropriate and how to do it correctly. Administration (Restrictions on Disposal etc.) Regulations 2021

Key facts

What it is: A pre-arranged sale completed as the company enters administration
Aim: Preserve a viable business, jobs and goodwill
Connected buyers: Need an independent evaluator opinion (2021 rules)
Oversight: A practitioner must judge it the best outcome for creditors

Why pre-packs are used and scrutinised

A pre-pack can rescue value that would evaporate if a business simply stopped. But because the buyer is often a connected party, the rules now require independent scrutiny. Done properly and transparently it is a valid rescue tool; done carelessly it invites challenge. This is firmly practitioner territory.

Common questions

Can directors buy back the business in a pre-pack?

Yes, but a connected-party sale must be backed by an independent evaluator opinion and a proper valuation, and the practitioner must be satisfied it is the best deal available for creditors.

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Pre-pack administration. A pre-pack administration is where the sale of a company business and assets is arranged before the company formally enters administration, and then completed by the administrator immediately on appointment. The aim is to preserve a viable business, jobs and goodwill that would be lost if trading stopped during a drawn-out process. The business often continues with little visible interruption. Because the buyer is frequently connected to the existing directors, the procedure is tightly regulated: since 2021, a connected-party purchaser must obtain an independent written opinion from an evaluator before the sale, and a Licensed Insolvency Practitioner must be satisfied the deal is the best available outcome for creditors. Pre-packs are legitimate and sometimes the only way to save value, but they attract scrutiny, so transparency and proper valuations are essential. A practitioner will advise whether it is appropriate and how to do it correctly.

Speak to a Licensed Insolvency Practitioner

Tell us briefly what is happening and we will arrange a free, confidential, no obligation call with a Licensed Insolvency Practitioner. The earlier you get advice, the more options you usually have.

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