Delay in pre-pack administration changes no surprise says Business Sale Report

The announcement that the changes to the pre-pack administration process are to be delayed until next year has not come as a surprise to many, according to industry experts at the Business Sale Report (BSR).

BSR Head of Business Appraisals, Stephen Ideh, said that the changes are necessary, but that April - when the changes are expected to now be implemented - has historically been the favoured month for insolvency-related updates.

"The delay in the pre-pack reform will come as no surprise to many," said Ideh. "There has been heavy debate on the subject for months."

Confirmation of the delay came from the Insolvency Service this week. The changes are set to include giving creditors three days' notice before a company is sold to a connected party or business.

The minister in charge of insolvency, Ed Davey, had previously said that the amendments would be implemented before the end of this year, but an Insolvency Service spokesman said that they had needed to consider all opinions in deciding when to put the changes into force.

"Following discussions with stakeholders, amendments are being made to the Statutory Instrument (SI) by our lawyers," he said. "The SI will not be coming into force by the end of this year and we are now aiming for next year."

Ideh explained that pre-pack administrations - which involve marketing a business prior to it entering administration and selling immediately thereafter, sometimes back to its directors or previous owners - are considered to be very convenient tools by insolvency practitioners. He said that giving creditors more time to have their say, however, is a welcome move.

"Insolvency practitioners claim the procedure often helps limit job loss and maintains customer and supplier confidence, which can often be damaged by liquidation or asset sale," Ideh pointed out. "On the other hand many creditors view pre-packs as an easy escape for directors who have failed to meet up with their repayments and through the pre-pack deal, are now allowed a new lease of life buying the business back with limited liability and a reduced company debt owed."

"The question arises as to whether those ultimately responsible for the company’s demise are best suited to run the company going forward. In our opinion creditors deserve more time to have a say in the matter."

Business Sale Report is the leading independent provider of mid-market business for sale listings information, supplying subscribers access to a comprehensive database of companies for sale with an annual turnover of between £200,000 and £10 million. The Business Sale Report also runs a daily email alert service that notifies subscribers about distressed business opportunities. These include businesses that have just appointed administrators and companies that have been issued with winding-up petitions.

Media Contact:
Stephen Ideh
Business Sale Report
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