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Pre-Pack Administration

A ‘Pre-Pack Administration’ usually features:

  • The sale of the company’s business and/or assets is agreed in principle with a new purchasing company before the appointment of an Administrator.
  • The company is placed into Administration.
  • The Administrator completes the agreed sale of the business and/or assets immediately after being appointed.
  • The purchasing company is usually controlled by the same directors and/or existing management team of the selling company.

This process is in the reverse order to the normal process of Administration where an Administrator is appointed first and thereafter the company and its assets are marketed for sale.

How We Can Help | Our Insolvency Litigation Services

We understand that entering into any form of administration can be a stressful and highly pressurised situation.

We assist our clients through many types of insolvency issues and we use our experience to deliver fast, cost-effective solutions wherever possible.

Feel free to call us for an initial no obligation discussion:

We are able to offer an extensive range of insolvency litigation services to:

  • directors, shareholders and members
  • creditors,
  • companies, and
  • Insolvency Practitioners

Our team of insolvency lawyers is experienced in advising in relation to a wide range of matters including:

  • The appropriateness of Administration and the type of Administration
  • Assistance in the selection of a licensed Insolvency Practitioner
  • Advice pre-Administration and during Administration
  • Advice in relation to Pre-Pack Administrations
  • Advice regarding Company Voluntary Arrangements
  • Transactions defrauding creditors
  • Transactions at an undervalue
  • Wrongful Trading | Fraudulent Trading
  • Preferences
  • Retention of title issues
  • Misfeasance claims against company directors
  • Director disqualification

Further features of a Pre-Pack Administration?

  • A Pre-Pack Administration is conducted to achieve the sale of the business and/or assets of an insolvent company.
  • The sale of the business and/or assets is agreed with the Insolvency Practitioner (acting as Administrator) in advance of his formal appointment.
  • The assets are sold under a Pre-Arranged Agreement and the business is transferred to the new company.
  • The new company is either controlled by the existing directors/management team or it could be a new set of individuals although it is rare for this to be the case.
  • Little open marketing will have been done prior to the sale, making it more likely that the purchasing company will be controlled by the current directors/management who will have needed to conduct little by way of due diligence of the purchase.
  • Secured creditors are likely to be aware of the Pre-Pack Administration but unsecured creditors are unlikely to have any advance notice.

Negative factors associated with Pre-Pack Administration

Pre-Pack Administrations have attracted a degree of controversy in recent times as there is the perception that the Insolvency Practitioner and the company are working together to the detriment of the unsecured creditors.

The criticisms relate to:

  • Unsecured creditors are prejudiced, as they are not party to the Pre-Pack Administration and have no voting rights unlike in a normal Administration.
  • The limited marketing that is conducted could mean that the value achieved in any sale may not be reflective of the true value, thereby impacting negatively on the unsecured creditors.
  • The Insolvency Practitioner is not accountable in the same way in a Pre-Pack Administration compared to a normal Administration – no prior approval of the court or creditors is required.
  • The Pre-Pack Administration process is a ‘closed’ process which is restricted to a limited number of participants. This leads some to have less confidence in the whole process.
  • Suggestions that some directors misuse the Administration procedure to gain benefit for themselves at the expense of the unsecured creditors. The Insolvency Service has wide power to sanction company directors including the instigation of Director Disqualification Proceedings.

Positive factors associated with Pre-Pack Administration

It is important to note that it is a requirement of a Pre-Pack Administration that the financial return to the unsecured creditors must be greater than would be available in a liquidation.

A number of factors in favour of a Pre-Pack Administration include:

  • the speed at which the process is concluded leads to considerable cost savings
  • jobs are preserved
  • goodwill is preserved
  • the long-term viability of the business is maintained
  • unsecured creditors may be able to continue to trade with the new company
  • whilst the Insolvency Practitioner does not need prior approval from the creditors, there is an obligation to provide the creditors with certain information such as:
  1. why the Pre-Pack Administration procedure was chosen
  2. the underlying information on which this decision was based
  3. the connections between the company in Administration and the new purchasing company
  • often the alternative to a Pre-Pack Administration is liquidation requiring the business to cease trading immediately and the loss of all the above-mentioned positive factors.

Alternative to a Pre-Pack | Company Voluntary Arrangement (CVA)

A CVA has the same effect as a Pre-Pack Administration in that:

  • the business continues to operate
  • the current directors and management team remain in place
  • goodwill and employment are both preserved

The advantage of a CVA to unsecured creditors is that:

  • the process is more open
  • each unsecured creditor has a vote and is kept informed of the Administration by the Insolvency Practitioner

For more information on a CVA please visit our page.

Who Can I Contact For Help? | Kangs Insolvency Solicitors

We welcome new enquiries by telephone or email.

Our team of expert lawyers is here to guide you in relation to any insolvency related issues including Pre-Pack Administrations and CVAs.

We are happy to provide an initial no obligation confidential consultation at our offices in London, Birmingham or Manchester or via video conferencing facilities to explore the issues in your case and to provide an assessment of how we can assist you.


Mr Stuart Southall | Head of Insolvency Team
0121 449 9888 | 020 7936 6396

Mr Tim Thompson
020 7936 6396 | 0121 449 9888

Mr Naz Maqsoom
0161 817 5020 | 0121 449 9888


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