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In an earlier article on BN, MP Jesse Norman talked about the possibility of the owners of Hereford United using a device known as 'pre-pack'.
This from 'Company Rescue'.
In the UK, a pre pack administration sale is a powerful, legal way of selling the business on to a trade buyer or a third party. Or to the existing directors operating under a new company (or "newco") if the business is facing serious problems and creditor threats.
If a winding up petition is threatened, this can be a powerful solution. Don't wait until a winding up petition is issued through, because pre-pack is not permitted after it has been issued.
The main advantage of prepack administration is the continuity of the "business". When the plan is ready and a contract of purchase is drawn up, the company is quickly protected by the Court - allowing the administrator to sell the "business and assets".
This gets rid of debts, unwanted or onerous contracts, and possibly some employees (although in most circumstances there could be TUPE issues that need to be addressed) and there can be no interruption to the business, which in itself can destroy value.
Another big advantage is that the cost of the process is lower than trading administration, as the administrators do not need to find funding to trade the business. The process, including the preliminary marketing, professional valuation work and discussions with creditors, can be very quick and done in a few days if necessary.
If a winding up petition is threatened, this can be a powerful solution. Don't wait until a winding up petition is issued through, because pre-pack is not permitted after it has been issued.
The main advantage of prepack administration is the continuity of the "business". When the plan is ready and a contract of purchase is drawn up, the company is quickly protected by the Court - allowing the administrator to sell the "business and assets".
This gets rid of debts, unwanted or onerous contracts, and possibly some employees (although in most circumstances there could be TUPE issues that need to be addressed) and there can be no interruption to the business, which in itself can destroy value.
Another big advantage is that the cost of the process is lower than trading administration, as the administrators do not need to find funding to trade the business. The process, including the preliminary marketing, professional valuation work and discussions with creditors, can be very quick and done in a few days if necessary.
