Review will consider the future of pre-packs

Mar 20 2010 by Iain Laing, The Journal

THE Government is considering new laws governing controversial “pre-pack” administrations after research revealed rules were being not complied with in more than a third of cases.

A report from the Insolvency Service found that voluntary industry rules introduced last January were not working as well as hoped, with non-compliance in 38% of pre-packs completed in the last six months of 2009 alone.

So-called pre-pack administrations have come under increasing fire in recent years as they have become more prevalent because of the recession.

They involve the placing of a company into administration and then an almost immediate pre-arranged sale of the remaining assets to a buyer that has already been lined up – a process that is completed swiftly and without public disclosure.

Their use has soared as businesses have come under pressure from the recession, with around a quarter, or 1,250, of all administrations in the year to March 31 expected to have resulted in a pre-pack.