Pre-pack administrations to be more closely monitored

Following vocal complaints by groups of aggrieved creditors, any future pre-pack administrations will be closely scrutinised by the UK Insolvency Service.

Pre-pack administrations have proved to be a fairly rapid way for companies in severe financial difficulties to shake off debts and burdensome assets and continue trading.

But several high-profile pre-pack business administrations, including Whittards of Chelsea and Tom Hunter's USC have highlighted the simple fact that company creditors are simply shrugged off and left in the dark about what is going on.

This month a new code of practice was launched by the government with the intention of making the whole process more transparent, especially to creditors. If insolvency practitioners are putting a pre-pack deal together for businesses in administration, then creditors must be kept informed both before and after the process as to who is is dealing with the administrator, what the terms of the deal are and what was involved in selecting the individual(s) or organisation taking over the running of the business.

Yesterday's statement to parliament by the deputy head of the UK Insolvency Service, Graham Horne, was the first clear indication that the service was going to be serious in the way they policed the code. He said, “We are going to get every statement into our office and see the administrator has followed the spirit, adding that they would prioritize the policing of pre-packs.

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